A second wave of Ethereum: Ethereum 2.0

In cryptocurrency(digital currency), Ethereum holds the second largest market capacity in the crypto world after Bitcoins. It uses decentralized and secure systems possessing blockchain technology. For token transactions, ethereum is used as a platform to verify in the nodes of a network.

Let us understand what Ethereum is.

Ethereum is open source, blockchain technology is based on a decentralized system. It enables smart contracts and dApps(distributed applications) and secures without interpretation of third parties. In 2014, ethereum launched ether to seek to develop and run applications inside it. Ether is classified for two purposes, one purpose is traded the same as digital currency exchange like cryptocurrency, and the other is used inside Ethereum to run applications and to monetize work.

But this technology was similar to other technology that follows the proof of work and only 30 transactions per second was possible. High algorithm operations made it secure and slow. Therefore, upgradation was made to build the proof of stake, increase scalability, and security.

This new version is known as Ethereum 2.0

You may be feeling why Ethereum 2.0 when Ethereum was already at its best. After you know the reason and difference between them. You will come to know how important Ethereum 2.0 is.

Let us know what is the ethereum 2.0?

What is Ethereum 2.0?

There is always a need for new technology and innovation is key to transform the world to become smarter.

Ethereum 2.0 is one of such transformations of technology. This upgrade is a change in the mechanism of the network, the number of changes in infrastructure and security. It supports 1,00,000 transactions per second that can be achieved through shard chains. This is launching in several phases.

In Eth2, Validators stake crypto for a right to verify a transaction. They are assigned to verify blocks on how much they own and how long, and others can then attest that the block has been verified. This transaction requires a minimum of 1684 validators to make it more decentralized and secure.

Now let us have a look on why Ethereum 2.0

Why ethereum 2.0?

You will be having questions like the existing ethereum operation is efficient. why the ethereum 2.0 came into existence. What is the proof of stake? Why validators?

So, let us know the answers to these questions

Eth 2.0 is the upgrade to the existing blockchain of Eth 1.0. This amplifies the speed, transactions per second, and scalability of the network. Eth 1.0 operates on a proof of work where miners use computer hardware to solve complex mathematical algorithms and the first miners to solve this complex algorithm adds new blocks to the blockchain. Then they are rewarded with a certain share i.e., 12.8% for each transaction. This whole process of Ethereum transaction takes more time.

In Eth 2.0, proof of stake has validators to verify the transaction. These validators are selected to propose the block based on the number of coins they hold and how long they have held. Other validators cross verifies the block and attests it. This attestation should be a minimum of 1634 to add the block in the blockchain and they are rewarded.

This process uses a beacon chain, where it doesn’t change anything in the existing network but introduces proof of stake in the network. Staking and becoming validators is easy than mining as it eliminates the energy-consuming process to solve complex puzzles. More validators participating in the network become more secure and more decentralized.

For the second Eth 2 upgrade, which involves shards, these shards improve the network and transaction speed by extending the network to 64 blockchains. These shard chains only can safely enter the ecosystem with proof of stake consensus mechanism. This reduces network overload and enhances transactions per second by creating new chains.

Let us know the difference between Eth 1.0 and Eth 2.0

How does Ethereum differ from Ethereum 2.0?

• Ethereum 1.0 uses a proof of work mechanism, whereas Ethereum 2.0 uses proof of stake.
• Eth 1.0 requires miners to solve high algorithms, whereas in Eth 2.0 validators are assigned.
• In Eth 1.0 30 transactions per second are made, whereas in Eth 1,00,000 transactions per second.

Now we will understand it deeper by knowing the working

The working mechanism of Ethereum 2.0?

The working process is the same as Ethereum 1.0. Only changes are ethereum 2.0 have four keys, validators do verification instead of miners and involves proof of stake. Let us consider an example, when X person transfers the coins to Y person, that transaction should cross four keys. Validators have two keys: a private key and a public key. Withdrawal has two keys: a private key and a public key.

These validators select the block, based on how much coins they own and how long. Other validators can then attest that they have cross verified the block and do attestation. It requires more than 16000 validators to process the transaction. When there is enough attestation a block is added to the blockchain and rewarded with a successful block proposition. This process is called mining.

This process is energy efficient due to the elimination of intensive computer algorithms. One needs to have these keys, to access data, or else the whole fund is lost. The process follows the proof of stake, making it more efficient and time-saving.

You never surrender the control of keys to anyone, or else this leads to technical risk which falls squaring off trade on your own risk. Once the key is lost, a malicious act takes place.

Ethereum 2.0 launching in different phases and let us now know these phases

Ethereum upgrades in three phases

• Phase 0

Implementation of beacon chain, this stores and manages the registry of validation as well as applying the proof of stake consensus mechanism for Eth 2.0.

• Phase 1

Integration of proof of stake, network is expected to launch with 64 shards i.e 64 times more secure than ETh 1.0

• Phase 1.5

Interim update, Ethereum officially becoming a shard and transitioning to proof of stake.

• Phase 2

Shards becoming fully functional and compatible with smart contracts. Adding ether accounts and enabling transfer and withdrawals, implementing cross-shard transfers and contract calls.

Closure

Ethereum 2.0 is the existence of change in the working mechanism, security, and reduction in time. Compared to Eth 1.0, Eth 2.0 decouples energy-intensive computer algorithms and the mining process makes slots more security-oriented. There are many co-founders and the Ethereum foundation is setting up a dedicated security team for Eth 2.0 to search for possible cybersecurity problems in the cryptocurrency. Ethereum 2.0 technology can be the biggest competition and this may lead to falling in Bitcoins.