A few quick disclaimers before we kick-off to discuss the Ethereum 2.0. I am not a financial advisor so, please consult yours before considering any investment on the crypto network specifically due to its high volatility.
What is Ethereum 1.0 before we embrace for the Upgraded version?
The very first step is we should know about Ethereum 1.0 which is in its current form, its drawbacks and why the need for Ethereum 2.0 was required. Ethereum 1.0 is the proof of stake blockchain which allows users to build their decentralized applications on the blockchain and more specifically its a smart contract platform that supports generalized scripting language. This language is 'SOLIDITY' and it is the language that developers will use to build smart contracts. The vision of Ethereum 1.0 is mentioned below:
The project was considered to be a decentralized supercomputer, which will execute any code on the supercomputing blockchain for a fee, which is the 'GAS'. And the initial hope of Vitalik Buterin 'The Founder of Ethereum Blockchain in 2015' and Canadian-Russian Programmer, was it was to become a kin to google playstore on the blockchain. Upload your decenterlized apps and use it any where in the world.
As anyone can realize that putting such an ambition vision is nothing but an easy task, as he sees Ethereum still relies on much of the same discipline as traditional blockchains. While they were revolutionary for the time they have also exhibited their limitations as Ethereum has struggled to scale. Indeed this problem is not exclusive to Ethereum as the number of other legacy blockchains has found scaling to a problem. And it's not just scaling but scaling in a manner that still keeps the network secure and decentralized. Indeed it is more a Trilemma then a singular problem. So, what are the main stumbling rocks to secure and decentralized scaling solutions?
The Problems in Ethereum 1.0
Well, the first and the foremost is the method of reaching the consensus, Ethereum uses the proof of work Ethash Mechanism to propagate blocks and confirmed transactions, This means Ethereum is similar to Bitcoin in terms of miners have to rouge there processing power to secure the network.
Processing power that's an economic cost in the form of mining rigs and electricity. And it all works well when relevant networks are small with limited transactions. When Ethereum was launched in 2015, there were few DAPPS with less processing power with small collections of nodes. However things have grown considerably since then, and so have the number of transactions and DAPPs. This has result in blockchain nodes which slows down the network considerably but also impacts the high GAS cost which skyrockets sometimes.
A singular main Ethereum network, all transactions and DAPPs computations have to be confirmed by all nodes on the network. This may not have an issue, if the network is small and relatively centerlized. However as the network is grown so to have the number of nodes. And there are over 7000 full Nodes on Mainet of Ethereum around the world. Each one of them has to store the entire network of Ethereum blockchain and they all have to agree on the state of set chain at any point and time. All of these nodes has to agree before the DAPP can compute. So, Not very efficent !!
The Solution: Ethereum 2.0
Of course, all the problems have been known by the Ethereum Developers and have long said that the network needs important updates to advance, which will pencil in July 2020. One of the major updates was purposed in a change of the function of the consensus mechanism, which is named as Casper Proof of Stake protocol, and the Ethereum developers were aiming for this consensus protocol for quite some time.
Many of you will be fully aware of what proof of stake but I should state in few lines below for the ones who still don't know.
Esentially in proof of stake, the miners are called the validators who purposed new block to the chain and validate new transactions through the process of voting. These validators will lock up a certain portion of crypto to take part in the ecosystem. They are staking their cryptocurrency in order to secure the network and earn their staking returns.
So, unlike with proof of work, where the economic cost of participation is electricity and capital. Where PoS the crypto staked or locked up and block reward is proportional to the amount of crypto being staked. Proof of stake is not a new concept but it was purposed on bitcoin talk back in 2011 and it is also being used by a number of blockchains currently. Which also includes delegated proof of stake DPOS used by EOS and NEO.
The benefit of proof of stake and the reason Ethereum wants to move to it is that it's much more scalable and you don't want to rely on the hungry mining rigs in order to reach the consensus on the network. It also means that transactions will be executed much more quickly like the EOS, and TRX with thousands of transactions per second capability, which Ethereum has currently only 10 to 12 transactions per seconds. The Ethereum Developers has been working on the proof of stake since 2017, to solve the problems being faced on the network. And the hybrid proof of stake called the Casper the friendly finality gadget which has been involved and now which has been proposed is a trasnactory blockchain which is being called the 'Beacon chain' and it's in Phase 0 of the Ethereum 2.0
So, the beacon chain can enable the staging ground for the Hybrid PoS to fully tested before being integrated into the Main-net and Main-Chain. And the important considerations are proposed as:
- Eth 2.0 is transferable to and from shards once phase 2 is complete (though this may change in the future).
- There will be a minimum amount of ETH stake needed in order to first bootstrap the beacon chain. This is defined as CHAIN_START_FULL_DEPOSIT_THRESHOLD in the deposit contract that will live on the ETH 1.0 chain.
to become a validator, you'll need to stake 32 ETH 2.0
- During Phase 0, all user transactions and smart contract computations will still occur on the Eth 1.0 chain.
All the validators will stake 32 ETH to join the ranks, and the beacon chain will randomly select the committees of validators to vote on which block to include in the chain. Which will also be used a new ETH called ETH2 which will serve the new asset for the validators. This new ETH2 will be earned by the validators or either be converted from the ETH1 through a smart contract. That will be a phase 0, Starting point of Ethereum 2.0
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