Since the Ethereum Blockchain was launched in 2015, it has become the most used decentralized network, facilitating:
- cryptocurrency swaps and conversion
- building decentralized applications, or dApps
- the creation of open systems that do not require third-party approval or permission
Since market interest has grown enormously, this demand has reached the original version’s maximum capacity and limits. Moreover, the number of new cryptocurrency market participants grows every year – and they are most interested in Bitcoin and Ethereum – significant upgrades are required.
Thus, Ethereum 2.0 represents a whole set of enhancements to the network, and the enhancements follow to increase the speed, efficiency, and Ethereum’s network scalability so it can process way more transactions and ease system congestions. This way, users benefit from shorter processing time and smaller fees and commissions.
Why do we need Ethereum 2.0?
Isn’t Ethereum good enough? The high adoption and utility of Ethereum have created such significant demand that sometimes the network is tense, congested, and filled to its maximum capacity.
The Decentralized Finance sector is still explosive at the moment, and Ethereum’s Blockchain is one of the most well-known and respected in the cryptocurrency space – and is the major hoster of these dApps.
Because of this, Ethereum’s network recently became slower, and taxes have grown a lot. This was an important indicator that the network, as it was built originally, is not durable and scalable enough. Ethereum 2.0 will solve these problems by substantially increasing the network’s capacity, thus reducing taxes and creating new solutions.
What is the current status?
The second phase of Ethereum 2.0, called “The Merge” – or “The Fusion” – is expected by 2023. However, ETH developers have recently postponed The Merge, given that initially, it was programmed for June 2022.
The first phase, called The Beacon Chain, occurred on the 1st of December 2020 and introduced the native staking in Ethereum’s Blockchain – a vital characteristic of the network’s transition to the Proof of Stake consensus.
The second phase “will merge” Ethereum’s leading network with Beacon Chain and will begin the transition toward Proof of Stake when miners will have nothing more to exploit and will be able to move on PoS, thus becoming validators.
What is Staking for a Proof of Stake network?
Proof of Stake is a consensus mechanism of the cryptocurrency sphere that processes transactions by creating new blocks in the Blockchain. A consensus mechanism is a validation method of inputs in a distributed database that keeps the ledger safe.
Unlike Proof of Work, which is the actual consensus mechanism of Ethereum, Proof of Stake significantly reduces the calculus quantity volume necessary to verify blocks and transactions that keep the Blockchain safe.
Instead of mining new coins, validators offer their held cryptocurrencies to be able to validate recent transactions. For example, in Ethereum’s network, 32 ETH coins are required to become a validator.
What does this mean for ETH 2.0?
ETH 2.0 will use the data fragmentation method for sending transactions. A validator will verify transactions and add them to a block of fragmented data that requires at least 128 validators to certify the integrity of the transaction. Once data is confirmed and the block is created, two-thirds of validators must agree that the transaction is valid – then the block is completed and closed.
Ethereum’s transition to Proof of Stake is a significant and wide-discussed event anticipated by the market. However, despite the delays and the lack of a clear deadline for the ETH 2.0 launch, Ethereum’s price managed remarkably well on the chart and the number of new users joining the ecosystem.
The Merge represents the climax of over five years of research and development, reaching the upgrade of a highly ambitious plan. Until Ethereum’s Blockchain, the crypto industry never saw a project of this dimension and value that tried to make the transition for all users and digital assets – to an entirely new decentralized network – while keeping all the functioning active operations of the old network.
A complete upgrade of Ethereum 2.0 will probably take several years, given the network’s complexity and the hard work of developers and IT teams, but it will surely benefit us all.
IXFI supports Ethereum’s transition towards the Proof of Stake because we are proponents of carbon neutrality and encourage everyone to use less energy to protect the environment. Trade Ethereum and hundreds of other coins on Your Friendly Crypto Exchange.
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