According to recent information, there are over 6.3 million ETH staked in Ethereum 2.0. The worth of the staked ETH is currently about $22 billion. Many questions arise, like what is ETH 2.0, and when will it be merged? This guide looks into Ethereum 2.0 and answers several questions about the project.
What is Ethereum 2.0?
Ethereum 2.0 is the upgrade of Ethereum. This system, also called ETH 2.0 or Serenity, introduces many solutions to the Ethereum chain. The system is up and running currently but awaits official merging.
Ethereum 2.0 – Proof of Stake
The first and most fundamental upgrade coming with Ethereum 2.0 is the migration from PoW to PoS. PoW system is inefficient when it comes to resource use, electricity and time.
Proof of stake is a very resource-efficient consensus mechanism. In PoS, users or validators put some stake of coins to be able to run masternodes. Unlike in PoW, where nodes compete to win blocks, PoS chooses the winning nodes based on the stake value.
Ethereum 2.0 master nodes have relatively fewer hardware requirements than PoW. Even an old laptop with the right OS will help in validating/running a staking pool. The minimum requirement for hosting a master node for Ethereum 2.0 is staking (holding) 32ETH. The dollar value of the stake depends on the ETH value at the time of purchase.
ZK STARKs, Zero-Knowledge proofs are another upgrade coming with ETH 2.0 launch. These proofs are a privacy enhancement feature for Ethereum transactions. ZK STARKs is an upgrade of ZK SNARKs, a system used by Z Cash.
In every transaction, only proof of a transaction occurring will be available. The rest of the details, including the names of the sender and receiver, will remain anonymous. By introducing ZK STARKs, Ethereum will onboard a community of privacy coin lovers. We could even start seeing the rise of Privacy DeFi tokens in Ethereum.
Sharding is another feature coming up with Ethereum 2.0. Sharding is breaking down the blockchain’s database into small partitions called shards. Each shard is independent of the other, but they all interact with each other.
Introducing sharding will make the blockchain expandable, thus solving the issue of scalability. Ethereum 2.0 blockchain can process multiple transactions concurrently since each shard is capable of hosting a transaction.
Ethereum is introducing 64 shards in its new network, thus creating 64 databases. The Ethereum Beacon chain will efficiently operate with cross-shard communications.
Upgrading the EVM to eWASM
EVM (Ethereum Virtual Machine) is a feature that makes it possible to build smart contracts on the ETH blockchain. Ethereum is introducing a new tool that is more user-friendly for developers; eWASM.
eWASM allows developers to use many programming languages, including the familiar C++. Providing a wide array of language options makes it easy for developers to choose their best fit.
Ethereum 2.0: The Merging
Upgrading a network as extensive as Ethereum, which has over 250 dApps, requires much work and attention to detail. Therefore, Ethereum 2 is coming in phases.
EIP 1559 came with another hidden upgrade, EIP-3554, designed to speed up the introduction of ETH 2. According to experts, EIP-3554 makes it harder and harder to mine Ethereum by adding ‘more and more miners’ into the system.
This EIP-3554 function will explode in December, making Ethereum mining impossible. Therefore, Ethereum 2.0 is merging before the end of December 2021. Phase 2 of Ethereum 2.0 is coming in December, introducing features like ZK-STARKs and eWASM.
The third phase is the introduction of the sharding, which will happen sometime in 2022.
What Does Eth 2.0 Mean for Ethereum Stakeholders?
Ethereum stakeholders are the parties involved with the network and its coin. They include coin holders, Eth 1 miners, and dApp builders, among others. Here is how each stakeholder will be affected;
- Ethereum Coin Holders – Ethereum 2 launch does not in any way affect the coins that circulate. Those coins will still be available since Eth 2 is not replacing Eth 1 but merging with Eth 1.
- dApps will still exist with Eth 2 merging. However, the support system changes immediately after the launch, and new dApp developers will use the eWASM. dApps are likely to benefit since Ethereum will be more usable for more investors.
- Ether Miner- Now, the mining stakeholders will need to switch to the new system, staking. Recently, when EIP 1559 launched, it cut off Ethereum miners’ source of income. However, Ethereum 2 will force them to use a more efficient system.
Could it be Too Late for Ethereum?
When Ethereum began experiencing system issues, other projects like BSC, Cardano, Polkadot, and HECO began introducing their solutions. Now that Ethereum is upgrading, some may think that the upgrade is too late. But is that true? Absolutely Not!
Ethereum has been in the dApp and smart contract business for over five years now. BSC, HECO, Polkadot, and Cardano are just introducing their systems. These platforms have not yet experienced the bad side of DeFi, like downtimes. As DeFi grows, most of those alternative smart chains will begin noticing the issues.
ETH solutions to scalability and speed will vastly improve the system, leading to more efficiency. Ethereum’s solutions are likely to function better than other smart chains and solutions. This is due to their five years of experience in the crypto world.
Ethereum 2.0 is coming in a few months, most likely December 2021. It introduces many solutions, the foremost being the PoS consensus algorithm. Others like zero-knowledge, sharding and the eWASM are also necessary upgrades with the ETH 2.0 system. Developers, investors, DeFi projects, and miners will feel the impact of the ETH 2 upgrade. However, the biggest effect is the price surges. Ethereum coins could hit new price marks. Some expert analysts predict that Ethereum could hit $10k and even go to $20k.