Since its inception, the Ethereum blockchain technology has grown to become one of the most extensive networks in the blockchain industry. With nearly $468 billion in market capitalization, Ethereum is only second to bitcoin. Ethereum is preparing to release the seminal Ethereum 2.0 upgrade, which will significantly overhaul the network and address issues such as scalability, high gas fees, and network congestion.

What is Ethereum 2.0?

Ethereum 2.0 is an improvement to the Ethereum blockchain. It aims to increase the speed, efficiency, and scalability of the Ethereum network, allowing it to address bottlenecks and increase transaction volume. Ethereum 2.0 is also referred to as Eth2 or Serenity.

When compared to its predecessor, Ethereum 2.0 has some fundamental structural and design changes:

  • Proof of stake: This is a consensus mechanism for ETH blockchain facilitators known as Validators, who examine ongoing transactions rather than Ethereum Proof of Work miners. Validators are required to post a 32ETH bond to prevent fraud.
  • Sharding: It is the process of dividing a blockchain into shards (multiple blockchains.) Sharding increases efficiency because validators keep track of their own Shard’s information. Validators will also be shuffled between shards to avoid manipulation and strengthen security, with communication between shards accomplished via the Beacon Chain.

Launch of Ethereum 2.0

The first phase, known as “phase 0,” is already operational. The beacon chain is introduced in Phase 0. The beacon chain is essentially a new PoS blockchain that will eventually merge with Ethereum’s current chain. 

The merge is the name given to the second phase, or “phase 1.” The merge marks the official transition to the PoS consensus model, with the existing Ethereum network merging with the beacon chain.

Shard chains will be used to implement state execution in “Phase 2” (or “Shard chains”), with the current Ethereum 1.0 chain expected to become one of Ethereum 2.0’s shards. Network traffic will be split among 64 new chains using shard chains. It will be released in 2023, with a 2022 initial release date.

Difference between Ethereum and Ethereum 2.0

The main distinction is the “consensus mechanism.” Ethereum employs proof of work (PoW), whereas Ethereum 2.0 will employ proof of stake (PoS).

The Proof of Work The PoW mechanism, in its current form, is a computationally and energy-intensive process that involves solving a complex mathematical puzzle that is currently used by Ethereum miners to validate transactions. The miner who solves the puzzle in the shortest amount of time wins a prize. The PoW mechanism is designed to encourage innovation in the renewable energy sector.

Transactions in Proof of Stake are verified by Validators rather than miners. Because securing a blockchain with PoS requires much less computing power for block creation, it is more energy-efficient than PoW. The Ethereum Foundation claims that Ethereum 2.0 will consume 99.95% less energy than Ethereum 1.0.

The Ethereum mining business is highly competitive, requiring significant investment in mining hardware and power consumption; this will change with the transition to Eth 2.0, allowing for greater participation.

What is the Future of ETH 2.0?

The transition to Ethereum 2.0 is gradual. For years, the Ethereum community has debated the implementation of the proof-of-stake mechanism. In fact, Ethereum is only now catching up to many existing proof-of-stake blockchains.

Let’s take a look at some of the potentially game-changing updates in Ethereum 2.0 that we’re all looking forward to:

  • Increasing Scalability: To address the current issue of network congestion, Ethereum is implementing a new and scalable processing technique. The process of distributing nodes into small chunks to increase data storage has been dubbed “sharding.” These smaller units have greater data storage and transfer capacity; however, implementing the entire system requires more brainpower than usual.
  • Better TPS: The massive increase in data exchange on the Ethereum network causes a delay in transactions per second. Ethereum 2.0 addresses the issue of slow TPS and promises 100,000 TPS! That is referred to as an update. In comparison to Ethereum’s previous TPS rate of 15-45.
  • Efficiency: Ethereum 2.0 offers a more comprehensive solution to the world’s problems. According to reports, Ethereum 2’s total energy consumption will be 99 percent less than Ethereum’s. To be honest, this opens up new avenues and introduces environmentally friendly options into the cryptocurrency space.

Another significant change that Ethereum will undergo is the transition from a proof-of-work (POW) to a proof-of-stake (POS) mechanism. This will aid in the network’s smooth operation. The Ethereum 2.0 update known as phase 0 is now live and operational! Their new upgrades will be implemented in stages and are expected to be fully operational soon.

How to stake and invest in Ethereum 2.0 (ETH2)?

Carret will continue to support ETH staking during the Ethereum 2.0 upgrade. Eligible customers can stake their ETH on Coinbase and receive up to a 17 percent APR in rewards (this rate is subject to change, dependent on the network).

Using the official Eth2 Launchpad, you can stack Ethereum directly on the Ethereum network. Over 8 million ETH had been staked on Ethereum 2.0 as of December 2021, with a total value of more than $36 billion. These ETH will be held in escrow until Ethereum 2.0 is fully operational.

Carret’s view on Ethereum 2.0

At the moment, the Ethereum Network can handle 15 transactions per second. The Ethereum network will be able to process 100,000 transactions per second after the release of ETH 2.0, according to the network’s founder.

This upgrade would speed up all Ethereum transactions and potentially bring in a large number of new users. Because it has many advantages over “Ethereum killers,” ETH 2.0 may be more valuable than ETH. As a result, some cryptocurrency experts believe that Ethereum 2.0 could be a good investment.

With low fees and a lower barrier to entry, DeFi and Ethereum’s prices have the potential to skyrocket. Of course, all of this is contingent on the success of Ethereum 2.0. To summarise, Ethereum 2.0’s foreseeable future in India poses a threat to other cryptocurrencies with enhanced services and greater vitality.