Ethereum 2.0: Here’s What You Need To Know

A Multi-Phased Release

Ethereum 2.0 won’t come in a day but through multiple phases of development and release. When it comes, this version will bring two main changes—Sharding and Proof-of-Stake Consensus.

Several think tanks and teams of developers have been involved in the creation of Ethereum 2.0. Even as we write this, more people are contributing from around the world. The point is, Ethereum is being developed by diverse minds, which will surely reflect in the final product. Having said that, let’s dive into the phases.

Phase 0

Phase 0 involves the launch of the Beacon Chain, which will provide the basic layer for further development. At this stage, the network will have a new token, namely ETH2. In case you are an existing ETH owner, you’ll be able to convert into ETH2 at a 1:1 ratio. A ‘Registration Contract’ will serve this purpose, while burning your old ETH. Primarily, you’ll be able to use ETH2 for staking, which in turn, will allow you to become a validator on the network.

Phase 1

In Phase 1, the network will implement sharding, thereby enabling multiple, semi-autonomous blockchains to run on top of the Beacon Chain. In doing so, the latter will serve as the coordination chain. Scalability will be the most prominent outcome of this stage, whereby the network will be split into 64 shards. Transactions and computations will become lightning-fast, while a cross-linking feature will allow individuals shards to interact.

Phase 2

Finally, in Phase 2, Ethereum 2.0 will become fully operational, following the implementation of its smart contract capacities. Often termed as the Execution Engine, this stage will see the merging of the existing Proof-of-Work (PoW) consensus with the upcoming Proof-of-Stake (PoS) consensus. ETH will also be merged with ETH2 in this phase, meaning that the latter will become the network’s sole token. Not to worry though, because you’ll have all the means to convert and won’t lose your existing assets.

Developments in 2020

In August 2020, Ethereum 2.0 had its final testnet launch, with 30K validators and 946K staked ETH. The test version, namely Medalla, was open to the public while allowing 5 clients to connect and communicate with the network.

On November 4, 2020, the Deposit Contract Address was released, which is essentially a staking pool. To become a validator on the network, you had to stake your ETH. The contract’s criterion is that, when the total staked amount reaches a minimum of 524,288, it’ll trigger the Beacon Chain’s launch. Not immediately though, but after 7 days. The threshold value also meant that, by that time, 16384 validators will be on the network—roughly, each node is taken to stake 32 ETH, at least.

To incentivize early adopters, the network algorithmically makes them eligible for greater reward amounts. Interestingly, the threshold was reached on November 24, 2020, and the Beacon Chain went live on December 1, 2020.

The Proof-of-Stake (PoS) Consensus: What’s Changing? Ethereum already has a partial PoS consensus mechanism, in combination with Proof-of-Work. However, Ethereum 2.0 will fully migrate to a more evolved and functional PoS mechanism.

The new validation process will involve a random committee of validators, each of whom will have to stake a minimum of 32 ETH2. The staking requirement ensures that validators have their skin in the game, which in turn, will incentivize desirable behavior. By validating malicious blocks, validators will lose their staked Ether. Penalties will also apply to idle validator nodes—they must participate in voting, as long as they remain validators.

On the contrary, working towards the network’s holistic betterment will strengthen their staking rewards over time. To test the staking function on the testnet, you can acquire Goerli ETH for free. You can’t use them for other purposes though.

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