Crypto communities all over the globe have been waiting with bated breath for Ethereum 2.0 for quite some time now. With the ‘Beacon Chain’ launch, the long-anticipated network had finally kicked off very recently on December 1, 2020.
In case you weren’t aware, Ethereum 2.0, also known as Eth2 or ‘Serenity’, is the next major network upgrade of the Ethereum blockchain. The upgrade is planned to be launched in several phases as of right now. These planned upgrades to the network intend to make the Ethereum blockchain simpler, more secure, scalable, and sustainable. It’s to be noted that the network upgrade will not lead to any changes in the data history or transaction records of the original Ethereum chain.
In this post, we discuss the path ahead for the Ethereum network. But before that, let’s first take a look at what Ethereum 2.0 is all about, shall we?
The Initial Roadmap for Ethereum 2.0
One of the foremost changes from Ethereum 1.0 to Ethereum 2.0 is the switch from its current proof of work (PoW) consensus mechanism to proof of stake (PoS). This particular move is meant to do away with a lot of the issues PoW-based blockchain networks have been facing, including scalability (Ethereum 1.0 can process only around 15 to 45 transactions per second) and energy efficiency. On Ethereum 2.0, all transactions will be secured by the staking of native crypto tokens instead of expensive and squandered computational power.
Danny Ryan, one of the lead researchers behind the Ethereum network, had laid out five important aspects of the design of Ethereum 2.0, which are full decentralization, flexibility, security, simplicity, and longevity. The aforementioned development phases of Ethereum 2.0 were initially supposed to be as follows:
- Phase 0: The Beacon Chain: The first step of Ethereum 2.0, the Beacon Chain, manages the Proof of Stake protocol for itself and all of the shard chains.
- Phase 1: The Shard Chains: With Phase 1, 64 shard chains were to be deployed, and the Ethereum 1.0 and Ethereum 2.0 chains were to start operating parallelly.
- Phase 2: The State Execution: Phase 2 was essentially supposed to integrate all the design changes implemented in the previous phases.
Finally, the developers planned to merge Eth1 and Eth2 upon the successful completion of all the phases.
With the now live Beacon Chain, the first step of Ethereum 2.0 is already underway. By implementing Proof of Stake rather than Proof of Work as its governing mechanism, the Beacon Chain is supposed to act as the base of the renovated Ethereum network. In the month since its launch, the Beacon Chain has proven to be a success, as over two million ETH (which, if you convert Ethereum to INR, is worth somewhere around 19000 crores as of Jan 2021) has already been committed to the deposit contract. The Beacon Chain has so far had a flawless run, with around 99% participation and nary a single issue or mishap.
So, what’s Next?
Ben Edgington, a long-time chronicler of Ethereum 2.0’s progress, describes the plan for Eth2’s further progress as a ‘three-pronged attack’, with the objectives being the merge between Eth1 and Eth2, sharding, and light clients. He describes them as ‘independent tasks that proceed together’ instead of being completed in any particular order.
We can expect the merge to happen when Eth1 is moved off the Proof of Work mechanism onto Proof of Stake. The EVM (Ethereum Virtual Machine) will continue to function as the core engine of the network, and basically, everything would remain the same as they are with PoW, except mining gets replaced by staking – the act of holding or locking crypto tokens to support the operations of a certain blockchain network and receiving rewards in return.
According to Edginton, the second ‘prong’ – sharding (initially labeled as Phase 1), is already quite well defined and is nearing the point where the developers are thinking of implementing it in clients. Therefore, it’s very likely that the next step we will witness in the transition from Ethereum 1.0 to Ethereum 2.0 would be scaling the network’s execution side from one execution chain up to several parallel chains shards.
In the initial roadmap for Ethereum 2.0, the developers had plans to deploy 64 shard chains in Phase 1. However, the actual number of shard chains has not yet been confirmed. Once the shard chains are fully in action, it can be expected that they would significantly increase both the transaction speed and network capacity of the Ethereum blockchain. Ethereum protocol’s security is also expected to get much stronger, as the Beacon Chain will randomly assign stakers to validate shard chains, making it impossible for stakers to attempt to take over a specific shard.
Finally, the third ‘prong’ would be to establish proper infrastructure to enable light clients or nodes on the Ethereum network – software that would be able to connect full nodes to the primary blockchain and allow them to exchange information. As of right now, the developers are still figuring out how to transform these three prongs into delivery plans.
If you have at least 32 ETH and are interested in staking them, you can be a validator and commit to the Ethereum 2.0 staking deposit contract. However, translating 1 ETH to INR, it turns out ETH’s price is about ₹90,000. This obviously means 32 Ethereum to INR is around INR 29 lakhs, which is quite a sizable amount of Ethereum to hold, and something not many can afford.
That’s exactly why there’s an alternative option for those who possess less than 32 ETH but would still like to participate as a staker when Ethereum 1.0 is fully merged with Ethereum 2.0. You can pool your resources with others to come up with the required amount. You’d have ETH staking pool options such as Rocketpool, with other platforms like Staked providing additional options.
Once the merging of Ethereum 1.0 and 2.0 is over, the Ethereum 2.0 staking rewards will be unlocked and tradeable, which is quite likely to cause considerable price disruption for ETH, at least in the short term.
For now, Beacon Chain solves the issues regarding consensus. By the end of 2021, the developers behind Ethereum 2.0 plan to solve the scalability issues as well. Whether they succeed or not, only time will tell. One thing is for sure, though: Ethereum 2.0 has already set a wider industry trend with its use of the PoS protocol as many of the major protocols that launched in 2020 (such as Polkadot) have already opted for PoS. We can fully expect Ethereum 2.0 to revolutionize the blockchain industry in the future as well fully.
To know more about Ethereum 2.0’s progress and get the actual contract address for deposits, you can check out the official ETH2 update here!
Interested in buying up some ETH to stake on Ethereum 2.0? You can perform swift Ethereum to INR trades on the WazirX platform, which has proven itself as one of the most secure cryptocurrency exchanges within the Indian crypto markets!
Happy Ethereum to INR trading!