The Ethereum network has experienced quite some upgrades since its inception. However, it seems that the road to growth has not ended for Ethereum. The network is set to launch Ethereum 2.0 soon, offering speed, scalability, and efficiency. Enough of the outlandish consensus mechanisms governing Ethereum. The Ethereum network will soon be reborn, bringing the new and improved Ethereum 2.0. This article will cover everything you need to know about the Ethereum 2.0 roadmap, phases, features, and more!
What is Ethereum 2.0?
Ethereum 2.0, otherwise known as Serenity, is a term used to convey the developments made on the Ethereum network. It looks into the cons of the old Ethereum network and enhances its speed and scalability. These implementations are performed through five main principles: Security, Decentralization, Simplicity, Resilience, and Longevity. The principles are used to guide the development of the network, ensuring that every upgrade is up to par.
Proof of Work vs Proof of Stake
A key change in the Ethereum network is its switch from the Proof of Work (PoW) to the Proof of Stake (PoS) consensus mechanism. A network’s consensus mechanism navigates the processes of mining, validation, and scalability, among others. Although Bitcoin uses the PoW consensus mechanism, many altcoins use the PoS consensus mechanism. PoW requires large amounts of energy and high computational efforts. Due to the strenuous efforts it takes to validate transactions, the speed is quite slow. Bitcoin mining is also followed by this rigorous process that poses great harm to the environment. This is why PoS was introduced to curb some of these problems.
PoS offers a more environmentally friendly network, efficiency, and speed. Unlike PoW, highly energy-consuming devices are not needed to carry on with their processes. Hence transactions can be carried out faster because verification is more convenient. PoS verifies transactions through a process called staking.
Staking involves locking up coins to enable a blockchain’s security. Users on a network may choose to lock up some of their coins. The network will then choose a user with a staked coin at random. This user is called a validator. Their coins will then be used to validate transactions and maintain the blockchain’s security. The validator, in turn, gets rewarded with interest from their initially staked coin. With Ethereum 2.0, miners and electrical energy will be eliminated. However, staking a minimum of 32 ETH will be required for validators. This deposit helps to keep validators in check and prevent malpractice.
Phases of Ethereum 2.0
ETH 2.0 is set to launch in three phases. The process has already begun, and upgrades are presently taking place in the network. Here are the three main phases of ETH 2.0:
The first phase, Beacon Chain, was released on December 1st, 2020. The Beacon Chain is regarded as the foundational component for all other upgrades and makes native staking possible on the Ethereum blockchain. Native staking is vital for the network’s shift to the Proof-of-Stake (PoS) mechanism. The Beacon Chain handles the basic consensus of the network which includes block creation, block validation, and rewarding validators.
The Merge is the second phase of ETH 2.0. It is set to launch in September 2022 and will merge the Beacon Chain with the Ethereum main net. This is the most significant upgrade in Ethereum’s history, as it marks the end of the Proof-of-Work mechanism and the beginning of the Proof-of-Stake mechanism. The Merge is also set to reduce Ethereum’s energy consumption by 99%.
Once The Merge is completed, the Beacon Chain will be the only consensus engine for all network data, execution layer transactions, balances, and block production. Mining will become obsolete. Instead, the Proof-of-Stake validators will be responsible for proposing blocks and processing the validity of transactions.
Sharding, the final phase, is set to roll out by 2023/2024 and will be responsible for increasing the capacity and scalability of the Ethereum network. Sharding means splitting a database horizontally to reduce the load. In the Ethereum network, sharding will work in sync with layer two rollups by breaking up the burden of handling large amounts of data needed by rollups over the entire network.
By doing this, there will be a reduction in network congestion. The Ethereum network management revealed that transactions per second would increase from their current rate of 15 to about 100,000. It will also be easier to run an Ethereum node on hardware like PCs and smartphones due to the lesser data needed.
Features of ETH 2.0
- Sharding: This involves splitting a single blockchain into multiple blockchains. Sharding makes it easier for validators to perform their processes faster and more efficiently. Each validator is in charge of information on their respective shards. However, validators change their shards from time to time to prevent manipulation on the blockchain.
- Proof of stake: The Ethereum network will make a switch to the Proof of Stake consensus mechanism. This is a key feature as the switch will make a turn around the Ethereum network. Staking is a great way to increase efficiency and scalability and maintain the blockchain’s security.
- Energy efficiency: PoS is a lot less energy intensive than the PoW consensus mechanism. It does not require as much computational effort as PoW. Hence, saving a lot more energy makes it environmentally friendly.
What is ETH 2.0 Release Date?
The first phase of ETH 2.0, the Beacon Chain, was deployed in December 2020. The second phase— The Merge is set to be launched stage-by-stage, from September 6th to 20th 2022, according to analyticsinsight. ETH 2.0 promises positive changes in the crypto market. The network will reduce energy consumption by about 99% and help investors perform minting and transaction processes faster.
Will Ethereum 2.0 replace ETH?
ETH 2.0 is not a replacement for ETH. Instead, it should be looked at as more of a merger than a replacement. Ethereum.org stated that ETH and ETH 2.0 should not be perceived as separate blockchains. Recall that the second phase of the upgrade is the Merge. This stage involves merging ETH1 and ETH2 as one. When that is achieved, there will only be a single Ethereum blockchain. ETH1 will serve as an execution layer that is responsible for transactions. While ETH2 will serve as a consensus layer that is responsible for the Proof of Stake (PoS) consensus mechanism. In addition, the native token of Ethereum- Ether (ETH) remains the same. Hence, there is no token replacement despite the launch of ETH 2.0.
Will ETH 2.0 reduce gas fees?
For the longest time, Ethereum has received uproar concerning its outrageous gas fees. Since ETH 2.0 entails that there will be a switch from PoW to PoS, investors have been hopeful that it will reduce gas fees. Ethereum Foundation announced that the merge will not affect gas fees. Ethereum gas fees are influenced by the high demand for block space. This factor is completely different from the network’s consensus mechanism. As we expect the block space for Ethereum to be high, so will the gas fees of the network.
How Will Ethereum 2.0 Affect the Price?
Several experts have predicted how ETH 2.0 will play a part in the increase in the price of Ethereum. Generally, experts predict that ETH might shoot up to $4,000 again in 2022. The Bloomberg Intelligence Analyst, Mike Glone, said it might end the year within the $4,000 to $4,500 range. Initially, Coinpedia predicted that 2022 could end with ETH being in the $6,500 to $7,500 range. However, with the bearish downturn this year, they have adjusted this prediction back to $2,500.
Subsequently, some experts have said that ETH will experience more volatility than Bitcoin due to The Merge. Crypto market analysts like Wendy O predict that ETH might crash by 85% from its all-time high of $4,800 to about $750.
There have also been hyperbolic predictions, such as the one made by Brian Shuster— Chairman, CEO, and President of multiple companies. He predicts an average of $100,000 per Ethereum token, which means that the total market cap will be approximately ten trillion dollars— a little bit over gold’s current market cap.
While it is still unclear what will happen, Ethereum’s upgrades must be functional and sustainable for widespread adoption. As investors continue to see advanced functionality, it is believed that Ethereum’s price value will continue to increase.
The ETH 2.0 roadmap is exciting, especially as the next phase, The Merge, is fast approaching.
The Merge marks the beginning of the POS consensus mechanism, a significant upgrade in Ethereum’s history. While there are speculations about the price increase of ETH, these speculations are unsure, as we do not know what the future holds. The future looks beautiful theoretically, and investors can hope it will be just as beautiful in the actual crypto market when the upgrades are done.