Ethereum 2.0.

Ethereum 2.0.

The crypto-world has been waiting a long time for the Ethereum 2.0. update to be released and the associated sharding implementation and transition of Ethereum to PoS. Vitalik Buterin announced these major changes in November 2018, they were actively discussed in the news, but the implementation of the update was postponed several times. The Ethereum Foundation team now promises to launch a new blockchain network, its genesis block will be launched on January 3rd, 2020. This is a new milestone in the history of the platform and the economics of the project will change completely. The launch date of the new Ethereum 2.0. network coincides with the launch date of the Bitcoin network on January 3, 2009.

Contents

To estimate the importance of this update, let’s talk about Ethereum basics and try to give a sight watch about the role of the platform on the crypto-market. Remember that this is the world’s largest decentralized blockchain platform, as well as the greatest open source platform with Ethereum price constantly growing, with the ultimate goal of becoming a global decentralized system and environment for decentralized applications. Unlike Corda, R3, Hyperledger with their B2B strategy, Ethereum is an open-source platform and gives its users unlimited access to its resources. The platform has existed since 2015, when it raised $15 million on ICO. In fact, it is the largest blockchain corporation in the world. The total capitalization of ETH cryptocurrency is $19 billion, the second cryptocurrency. Other blockchain platforms such as EOS, Tron, Binance Chain, Stellar and other blockchain platforms are struggling to catch up with Ethereum. This means that the Ethereum Foundation does not just want to implement a new update on the platform. This is due to the fact that the competitors are stepping on the heels of Buterin’s team. Although ETH is out of reach in capitalizing on its cryptocurrency, it is losing leadership in other areas. For example, unlike Ethereum, tokens and transactions in an EOS network can be released free of charge. More and more Binance-related projects are moving their infrastructure from Ethereum to Binance Chain. Similarly, Ethereum is losing to Tron and EOS in terms of average transaction volume. You can read more about this in a recent Binance report.

Active users of Ethereum Dapps declined nearly 60% from January 2018 to January 2019.
Active users of Ethereum Dapps declined nearly 60% from January 2018 to January 2019.

Developers’ concept

Ethereum users are facing the fact that the blockchain is no longer able to handle the increasing number of transactions. The task facing Ethereum developers is to increase the scalability of the network. Hundreds of decentralized applications are currently running on Ethereum, but their speed and gas price do not meet the needs of users. It became especially noticeable when Cryptokitties game gained great popularity and significantly slowed down blockchain operation, so that Ethereum developers had to carry out its month upgrade. In order to increase the speed of operation, it is necessary to increase the speed of the network, i.e. the speed of transactions and their recording into blocks.

Application developers only need to know a small portion of the Ethereum 2.0 protocol

The ultimate goal of the Ethereum Foundation is to create a global computer. It should be a decentralized blockchain platform that supports thousands of transactions per second, their processing is cheap and does not require huge energy costs, as it is now done during Proof-of-Work mining. Two things need to be done to implement this strategy. The first is to transfer the Ethereum blockchain protocol from the Proof of Work to the Proof-of-Stake algorithm. 

And the second decisive technology will be the concept of sharding. Its essence is to create a huge number of parallel blockchains that process transactions independently, but are connected by a common network and history of operations. Different parts of the Ethereum database will be stored on different shards, which will increase the speed of the network. Note that sharding has already been successfully implemented in the main network of Zilliqa blockchain. By the way, you should know that Ethereum as well as Bitcoin is often used for P2P-transactions, payments and money keeping. So Ethereum Foundation doesn’t just aim at creating the global computer, but also the global payment system. ETH owners store their money in hot wallets, the most popular one are My Ether Wallet and Metamask. The implementation of Ethereum 2.0. will increase the speed of payments in ETH and make wallets more secure.

Roadmap

The Ethereum 2.0 Roadmap

Since the launch of the Ethereum network in 2015, the developers planed 4 stages of its development. 

  • Frontier;
  • Homestead;
  • Metropolis;
  • Sirenium.

During the first stage, which began in 2015, users got an ability to mine ETH, build decentralized applications and create tools. Next stage of Ethereum development started in march of 2016. It was the first update, transactions’ speed increased and protocol upgraded. Next stage of Ethereum development Metropolis began in october of 2017. There are two big parts of Metropolis: Byzantium and Constantinople. Byzantium’s goal was to increase the security of the network and also to increase its speed. !!Also, as part of the implementation of Bizantium, a more predictable algorithm for calculating gas prices and easier programming for developers was developed.!! Most importantly, Byzantium changed the mining algorithm, created a difficulty bomb and reduced the commission paid to miners from 5 to 3 ETH, in preparation for the next system update and the transition to PoS. The new Ethereum blockchain fork within Metropolis was launched on February 28, 2019, when the Constantinople add-on was introduced into the network protocol, an important outcome of this upgrade was a reduction in the miner award from 3 to 2 ETH per block. Ultimately, the difficulty bomb should make mining unprofitable and force the community to switch to PoS.   

Ethereum 2.0.

This will happen as part of the next stage of the platform development – Serenium or Ethereum 2.0, which will completely change the specs core of Ethereum. The implementation of this addendum provides for 4 phases from 2020 to 2021. Within the framework of this phase, the PoS protocol called Casper will be implemented, blockchain will transfer to sharding, the virtual machine will be renewed and the project’s economy will be changed. At the same time, the existing plans for the deployment of the network provide for the integration of the old version of the network (Eth1) in the smart contract within the new network (Eth2). A full launch of Eth2 should take place in approximately two years.

Sharding Ethereum 2.0 Scalability
Ethereum 2.0 Scalability

Ethereum 2.0. will use the PoS consensus algorithm together with sharding. In zero phase of Ethereum 2.0., which is scheduled to start on January 3, the new network will be launched and will exist in parallel with the old one, it will be supported by validators. To become a validator it is enough to send transaction through the old Ethereum network (Eth1) per smart contract, a.k.a. deposit contract. All deposits are written to Eth2 blockchain, so called the Beacon chain and the validation algorithm is already installed on the network. As part of the zero phase network Eth2 will be launched, it will activate the algorithm Proof of Stake and deposit contracts, but it will not support decentralised applications.

As part of phase one, a basic sharding-structure will be added, which will significantly improve the network bandwidth and will be an important milestone for the scalability of Ethereum. This will be the basic implementation of sharding, and smart contracts will not work in it. 

By the time phase two is complete, the sharding will have been implemented and smart contracts will have been implemented. The biggest improvement in Phase 2 includes the integration of EWASM (Ethereum Flavored WebAssembly), which is the next Ethereum Virtual Machine specification based on WebAssembly. EWASM will allow faster code execution and provide an improved development environment.

Phase 3, which is too early to talk about, provides for a fully sharded blockchain, pure PoS consensus protocol, and transaction confirmation time in the range of 8-16 seconds. Do not think that this will end the development of the network, because the developers of Ethereum always have a lot of original ideas.

Security

Yet, despite the need for upgrades, many users are concerned about the future security of the network’s cryptocurrency. A reduction in the award for the block’s extraction will result in a decline in the profitability of Ethereum mining. This, in turn, will result in a drop in network hashrate, making it easier for attackers to attack 51% of blockchain coins. In early 2019, Ethereum Classic faced a similar problem, the damage exceeded $1 million, and user confidence was partially lost. By the way, to avoid during the recent conference in Tel Aviv, Buterin noted that the Ethereum Foundation will continue to conduct network security audits during the preparation of the update activation. We hope that the team of the second cryptocurrency of the world will leave no unprotected places for intruders.

Realization

Ethereum 2.0 Realization

Currently, three Ethereum 2.0 test networks have been launched, each based on its own client. The next step is to form a single network with support for several customers. In 2019, the launch of Eth2 was postponed several times, but maybe the opposite is already happening – the development of Eth2 is moving faster than expected. At the moment, three different test clients of Eth2 are already connected to each other via Local Area network and can interact with each other. According to co-founder of Sigma Prime Adrian Manning current Eth2 programming languages are compatible: Nimbus from Status, Artemis from PegaSyS, Lodestar from ChainSafe and Trinity. Ethereum developers and smart voices of the team say that they did not expect it to happen so quickly.

Economic essence of this update

For traders and investors in the update Ethereum 2.0. the most relevant economic consequences of the chain the beacon launch. The introduction of this update means an increase in the ETH price in the long run, because now, thanks to deposit contracts, node holders will need to keep a large number of cryptocurrencies locked on contracts in order to profit from staking. Validators’ costs will be much lower than miners’ costs, as they will not have to spend money on electricity. It can be expected that the minimum amount of money invested in the purchase of ETH cryptocurrency will increase significantly. And by the way, avoid scam when sending money to deposit contracts their addresses will be presented in October 2019. Unfortunately, as in the case of other innovations in the world of cryptocurrencies, there are sure to be those who want to scam deposit, but it seems Ethereum developers are ready to deal with it.

Conclusion

Despite the proximity of the update date, it is not clear how the data transfer between Eth 1 and Eth 2 will be carried out. the final transition of the platform to the sharding algorithm will take about 2 years and all this time the Eth 2 network can work unstable, and it is not clear what will happen to Eth1. It is possible to transfer data between networks through two-way bridge between Eth1 and Eth2, for it it is provided creation of the special easy client. Also, the performance of the network may be adversely affected by the reduction of awards for miners in the Eth1 network will be 0.6 ETH per unit. By the way, the Eth2 validator award is 0.22 Eth per unit. How successful the implementation of the update will be depends on the future of Ethereum, if everything goes according to the developers’ plan, blockchain Ethereum will become unattainable for competitors and will implement ambitious plans for a new implementation of blockchain technology. For example, blockchain Ethereum can be implemented in the supply chain. In addition, the update will allow ETH cryptocurrency holders to make good money with Proof of stake consensus algorithm. However, it is still difficult to understand how much words matter, the test network is still not running, and its launch may be delayed again.

Share Post:
CryptoTrading ideas
Crypto Trading ideas overview for 18-28 September
Amid stagnation and a slight drop in the price of bitcoin, traders note a decrease in BTC dominance and an increase in...
Cryptocurrency trading strategy
Cryptocurrency trading strategy: diving in
Contents How to Trade Cryptocurrency – Getting Started Cryptocurrency Trading How to Compare Exchanges Risks Taxes and...
Crypto&Trading Glossary: 45+ most popular terms in 2019-2020
Are you just starting your way in cryptotrading? Here we have gathered the most important terms you should know....
How to choose best cryptocurrency portfolio tracker
How to choose best cryptocurrency portfolio tracker?
Here we have gathered information about the most popular cryptocurrency portfolio trackers in the world and a few...
Subscribe

Find out first about new and important news

We protect your data and don’t send spam