Ethereum 2.0 (Eth2) represents one of the most significant improvements upon an existing cryptocurrency and is light years ahead of the antiquated banking system. This upgrade to the existing Ethereum network has been in the making since 2014 and serves to address three main issues: resolving the clogged network, freeing up disk space and reducing energy consumption – all while reinforcing security. The enhancements which were developed are being incorporated gradually in stages, rather than all at once, to ensure smooth operations.
The vision of Eth2 includes improved scalability by segmenting the data on the blockchain into more manageable, distributed chunks of data known as shards. These shard chains will more evenly spread the load of the network into 64 new chains. These shard chains will allow network validators to only run their own shard instead of the entire Ethereum chain to validate transactions on the blockchain, which will make nodes more lightweight, enabling Ethereum to process thousands of transactions per second and to scale in a decentralized way.
Eth2 also includes major improvements to security that will help thwart the possibility of coordinated network hack attempts, like an unlikely 51% attack where a majority of the network conspires to force through fraudulent changes to the blockchain. This issue was addressed with Ethereum’s transition from a Proof of Work (PoW) system to a Proof of Stake (PoS) system. Since validators need to deposit, or stake, significant sums of Ethereum digital coins to gain control, there is a substantially higher disincentive for hackers who could lose all their staked coins during these attempts.
Improved sustainability will be achieved via PoS as well, since there won’t be a need for massive computing power and electricity consumption as in the PoW mining process. Instead, staking will remove these intensive requirements and will be much better for the environment.
The Eth2 enhancements are being introduced in stages that are called the Beacon Chain, Shard Chains, and Docking. The Beacon Chain which was just launched and is now live, introduces staking to Ethereum. Shard Chains which will launch in 2021, will spread the load of the network as discussed. And Docking will occur in 2022 where the systems will all be docked or integrated into the new Eth2 protocol.
While staking has been introduced by the Beacon Chain, the Ethereum in use today will continue to run in parallel for a period of time, before it ‘merges’ or ‘docks’ with the Eth2 enhancements. One system will be secured by Ethereum coins via staking, the other by the old PoW system’s computing power. This is needed because, shard chains won’t initially be able to handle all user accounts or dapps (decentralized apps).
Once the Beacon Chain and the Shard Chain upgrades are up and running, work will begin on docking mainnet (the main blockchain network) with the new system. This will turn mainnet into a shard (i.e. broken up into more manageable chunks of data) so that it’s secured by Ethereum coins (ETH) via staking which will be far less energy intensive.
(This is Part 1 of a 3-part series. Click here to view Part 2)