Ethereum is a leading altcoin with strong fundamentals, active community of supporters and developers and it is a popular launching pad for decentralized applications. As mentioned, the Ethereum project is heavily supported by its community and more applications are being developed as we speak. In this article we’ll dive into the details of Ethereum 2.0.
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What is Ethereum 2.0?
Ethereum 2.0 has been discussed by the community and it has been under development since 2018 and the first phase is proposed to roll out at the end of 2019. Ethereum can process roughly 25 transactions per second, which is clearly not sustainable or up to scale if it was going mainstream. To put it in perspective, Visa is capable of performing 24,000 transactions per second, although the demand is only about 4,000 tps at peak hours.
Ethereum 2.0 has a more environmentally-friendly approach compared to Ethereum. Ethereum will switch from Proof of Work (PoW) to Proof of Stake (PoS) in this update. In PoW, getting the right answer is difficult and expensive however you get rewarded for getting it. The downside of PoW is that there’s massive power consumption, which is the least environmentally-friendly option. For instance, Bitcoin energy consumption is comparable to the country of New Zealand. By switching from PoW to PoS, Ethereum will also become more secure by solving the 51% attack problem. Their AMA includes more details about preventing those 51% attacks.
Miners aren’t able to cheat the system because it takes real-world resources to work out these solutions. PoW is vulnerable to the 51% attack and one of the biggest downsides of PoW is that is relatively vulnerable to a 51% attack. With that ability, they could invalidate valid transactions and double-spend funds.
In Proof of Stake, a miner stakes, or commits a number of their coins to verify a block of transactions. Obviously, the cryptographic calculations in PoS are much simpler for computers to solve, but the operator only needs to prove ownership of a certain percentage of all coins available in a given currency. For example, if the miner owned 1% of all Ether (ETH), they’d be able to mine 1% of all transactions across Ethereum.
The protocol that the network is switching to is called Casper. The Casper protocol has been created to help Ethereum make the move from a Proof-of-Work to a Proof-of-Stake model while minimizing the risks associated with such a development. Casper will be implemented in stages to reduce the risks on the network. The first stage will be Casper FFG, which is a mixture of both PoW and PoS. In this case, PoW will still be the main algorithm securing the network but every 50th block will be validated through PoS. It’s important to note that early versions of PoS will not be decentralized. As Ethereum tests staking mechanisms, only a few participants will be allowed to join, and as such, PoW will coexist with PoS for the first few weeks.
The following are the broad design goals for Ethereum 2.0:
- To minimize complexity, even at the cost of some losses in efficiency.
- To remain live through major network partitions and when very large portions of nodes go offline.
- To select all components so that they are either quantum secure or can be easily swapped out for quantum secure counterparts when available.
- To utilize crypto and design techniques that allow for a large participation of validators in total and per unit time.
- To allow for a typical consumer laptop with O(C) resources to process/validate O(1) shards (including any system-level validation, such as the beacon chain).
Ethereum 2.0 will be launched in multiple stages.
- Phase 0 (The Beacon Chain)
- Phase 1 (Custody Game)
- Phase 2
Its an exciting update on the existing Ethereum Network and and there is a lot more to discover as Ethereum 2.0 is phased in.
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