Ethereum 2.0 is a series of upgrades intended to make the Ethereum network more efficient and scalable, including switching over to Sharding which may lower transaction costs while improving accessability. This multi-year process includes the implementation of Sharding technology.
Upgrade will also enable users to unlock rewards by staking ether tokens, leading to greater decentralization and encouraging new dApp entries into the space.
1. New Proof-of-Stake (PoS) Consensus Mechanism
Ethereum 2.0’s most striking change is a shift from energy-intensive proof-of-work model to proof-of-stake (PoS), which will significantly lower energy costs associated with running it while simultaneously improving scalability and improving scalability.
PoS is an alternative approach that utilizes less electricity for verification, while still remaining secure and decentralized compared to mining.
PoS also makes staking more appealing as validators receive rewards both for proposing new blocks and verifying them, making the system much more scalable as more transactions can be processed simultaneously without jeopardizing security.
However, this alone won’t address scalability issues, and that’s why Ethereum 2.0 will introduce a technology called Sharding. Sharding divides a blockchain into multiple “shard” chains which process and validate blocks simultaneously so as to speed up main chain operation.
Sharding will reduce the space users would require on their computers in order to run nodes, making it easier for anyone to become validators and increasing decentralization. The “verge” phase will also include technical upgrades like stateless clients and Verkle trees which make confirming and verifying transactions without needing a large data storage footprint possible.
2. New Sharding System
Ethereum 2.0 features a revolutionary sharding system which will enable more transactions to be processed at once and thus increase speed, reliability, and energy savings across its network.
Ethereum currently only has the capacity of processing 12-30 transactions per second, far below other blockchain networks such as Bitcoin or Visa. This is due to each node on the Ethereum network being responsible for processing and storing an entire copy of its blockchain (which can take up to 300 GB storage capacity) on their computer.
Sharding allows Ethereum network to scale by breaking its state and history into smaller segments known as shards. Each shard will have its own set of validators who will validate blocks on that particular chain via an attestation process and publishing that information to all other participants in a confirmation block. Any proposed block that contains invalid or malicious data will be rejected by other validators and lead to the loss of stake for that validator.
Sharding allows shards to connect and share data related to transaction and smart contract execution, which provides additional benefits.
3. Improved Security
Ethereum 2.0 Upgrade’s main goal is to strengthen protections against cybercriminals while simultaneously lowering transaction costs and decreasing potential breakdowns during peak usage periods. That is why upgrading network protection solutions is one of the main goals.
Moving towards Ethereum 2.0 should also help improve scalability. The current blockchain often experiences bottlenecks due to high gas prices and slow transaction times; as a result, increasing its scalability is vital if Ethereum wants to reach more users.
Beacon Chain was launched as part of this upgrade in December 2020 and eventually will merge with Ethereum mainnet. Furthermore, developers will implement Sharding technology which should drastically increase transaction speeds while simultaneously decreasing fees.
After the Merge has concluded, existing holders of Ethereum may receive new proof-of-stake tokens depending on whether custodial wallets and cryptocurrency exchanges support forked versions of the coin – this could have tax repercussions.
The next phase will feature stateless clients and verkle trees to make it easier for users to validate transactions on the Ethereum blockchain, while eliminating the need to store large amounts of data on one’s computer to run nodes. Following these updates are surge and purge upgrades which will further increase scalability and security.
4. More Scalability
Ethereum 2.0 Upgrade seeks to increase both network scalability and accessibility. As the Ethereum platform hosts numerous smart contract-based decentralized apps, its blockchain must be capable of handling more transactions per second while decreasing transaction costs to expand user numbers and expand their user bases.
The initial Ethereum network was limited in capacity due to its reliance on a proof-of-work consensus mechanism similar to Bitcoin’s, leading to skyrocketing transaction fees and network congestion as well as higher energy consumption. Therefore, The Ethereum Foundation decided to move away from traditional PoW systems with an upgrade package called Serenity that eventually evolved into what we know today as Ethereum 2.0 or 2.0+.
Though its implementation of Eth2 took longer than planned, its progress is currently on schedule. The first phase, known as Beacon Chain, launched in December 2020 to allow individuals to stake ether – its native token – as part of validating and verifying processes of Ethereum network; receiving rewards in form of fees rewards in return.
Cancun will implement proto-dank sharding and increase scalability of the blockchain while decreasing transaction costs and processing times – with the goal being that Ethereum becomes a truly viable global platform for DApps and crypto services.