What is Ethereum 2.0?
Ethereum 2.0, also known as Serenity, is coming very soon. The update will kick off on 1 December 2020, changing Ethereum forever. What does Ethereum 2.0 mean for existing users? What do users need to do to be ready for the update?
The Ethereum ecosystem continues to grow and evolve through uptake and development. Following the Constantinople and Istanbul hard forks, the ongoing work for Ethereum 2.0 is going live on 1 December 2020.
Users are wondering if their Ethereum assets will be affected by the update. Those who trade and store Ethereum assets on their BtcTurk account or personal wallets will be happy to hear that everything will continue to be securely stored on the Ethereum blockchain. For people who mine or are looking to earn Ethereum, things might be a bit more complicated during the transition to Serenity.
The transition from Ethereum to Ethereum 2.0
Ethereum 2.0 was first announced in a presentation by Vitalik Buterin, a founder of Ethereum, at the Ethereum Developers Conference (Devcon) in 2018. This new version of the blockchain, frequently in the news because of delays, will mark a significant change for the Ethereum ecosystem.
Serenity’s development team also handled the Constantinople and Istanbul updates, which were mandatory updates. The Ethereum 2.0 transition process will consist of three stages.
Instead of the regular Proof-of-Work/PoW consensus, Ethereum 2.0 will use a Proof-of-Stake consensus. It has a significant upside — the network will be far more energy efficient and less resource intensive.
Mining in the current system will be replaced by staking, and unfortunately, once Ethereum 2.0 is fully active, miners will not have a function. By locking Ethereum in their wallets, users will be able to generate passive income through a Proof-of-Stake consensus.
Ethereum 2.0's official final test network, Medalla, started working with 20,000 participants on 4 August 2020. This test network will be the last test network before Ethereum 2.0 phase.
Stage 0 — the Beacon Chain
The first step, named the Beacon Chain, will host the Casper Proof-of-Stake protocol. This protocol, which will change the mining method in the Ethereum network, will also provide a transition to the data transport method called Sharding. This method, which facilitates the transfer of data by breaking it into pieces, will also allow the Ethereum network to scale faster.
The biggest confusion for users during Stage 0 will likely be the fact that there’ll be two different Ethereum blockchains for a while. Both the current Ethereum blockchain and the Ethereum 2.0 blockchain will run simultaneously for a short period.
Users will be able to start earning money from the Proof-of-Stake mechanism during this phase. To do this, they will need to transfer at least 32 Ethereum from the current chain to the Ethereum 2.0 chain. However, transfers from the Ethereum 2.0 chain back to the existing chain will not be possible until Stage 1 begins.
Stage 1 — Shard Chains
Sharding is a method used in classical databases — data is broken up into pieces to make it easier to move and process. The same principle applies to Shard Chains, which allow multiple transactions to be performed at the same time.
Stage 1 aims to create 64 Shard Chains. The stage will be a test phase for the Shard Chains. The sharding structure will be established and data validity checked. Test users will test if the Shard Chains function as expected between each other.
At this stage, the current Ethereum blockchain and the Ethereum 2.0 blockchain will continue to exist in parallel, as the testing process continues. Proof-of-Stake validation and regular mining on the original blockchain will happen simultaneously, this means that the amount of Ethereum released into the market will likely to be higher than normal. However, with Stage 1, as Proof-of-Work mining (PoW) and Ethereum production will also be reduced, production inflation is expected to stabilise.
When sharding testing is completed, there will be serious decreases in network usage and transfer costs. Because of this, it will be possible to generate and transfer smart contracts (tokens) on the Ethereum or Ethereum blockchain at much lower costs.
Stage 2 — State Execution
Phase 2, arguably the most critical phase of the Ethereum 2.0 transition, known as the State Execution. Functions tested separately in the previous stages will be brought together here. Shard Chains will switch from a simple transaction structure to a regular transaction structure, and smart contracts will be renewed to work with this structure.
It will be an important stage, especially for decentralised applications (dApps). Developers will need to select the sections they want to work on and make their apps suitable for Shard Chains.
These three development stages will be carried out in order to ensure the transition to Ethereum 2.0. Despite this, it remains unclear when and how the current blockchain, wallets and smart contracts will migrate to Ethereum 2.0.
Considering the delays users faced for previous updates, Ethereum 2.0 might be some way off. If you’re not a developer or tester, you must wait until all steps are completed before moving your assets from the current blockchain to Ethereum 2.0.
