What Is Ethereum 2.0?

Nowadays, everywhere you look, there is someone trying to eliminate Ethereum. At certain times, it seems like there are individuals that pop up monthly to destroy this highly-advanced ecosystem.

Many of them believe that Ethereum’s reign will come to an end. They think this due to its high gas fees and low number of transactions per second. But, these people forget that users built thousands of projects already on the Ethereum blockchain.

Those projects range from Uniswap, the biggest decentralized exchange, to OpenSea, the largest NFT marketplace. Also, Ethereum’s community has rapid growth, regardless of the numerous attacks on a monthly basis.

Many believe that the Ethereum project will reach new heights thanks to its long-awaited upgrade Ethereum 2.0, aka Ethereum Serenity. The company released it in mid-2022 and experts believe that many blockchain projects will try to catch up.

Will Ethereum’s advantage as a first mover maintain its solid position as the second-best crypto coin on the planet? This is something that is still unknown, but as time passes by, we’ll certainly know the answer. Until then, we can reveal what Ethereum 2.0 can provide.

Definition and Meaning of Ethereum 2.0

Ethereum 2.0, or Ethereum Serenity, isn’t another cryptocurrency offered by the same ecosystem. It’s best to think of this project as an upgrade to the already existing Ethereum network.

The main purpose of this upgrade is to tackle the many problems of the famous blockchain. Among these issues are usability, scalability, and sustainability. Even though this cryptocurrency reached unprecedented levels of market value this year, some coins can still threaten its position.

Some of those cryptocurrencies are Solana, Zilliqa, Cardano, and Algorand. This may occur if the second biggest crypto coin fails to solve its many key issues.

It’s a well-known fact that newer crypto protocols offer higher transactions per second. They also come with better network fees and scaling solutions. This is due to the latest technologies, which often have certain advantages over older technologies. So, Ethereum to upgrade in order to keep up.

Usability

At the moment, with Ethereum’s non-upgraded state, users get to pay enormous transaction fees known as gas fees. Traders pay gas fees in order to provide the energy needed to verify and conduct the transaction on the Ethereum blockchain.

These enormous fees occur when the network is busy processing and conducting a large number of transactions. Even requesting a simple token transfer on a decentralized application can result in gas fees of up to $200 on busy days.

Whales who have millions of dollars worth of ETH that play with DeFi apps see this as a child’s play. However, every average person who works super hard to earn a few bucks won’t like paying $200 to transfer digital assets.

These high fees made it much more difficult for an average crypto user to participate in Ethereum applications. Some of those activities are trading crypto on Uniswap or purchasing NFTs on OpenSea.

The barrier to entry would be too high for an average person to use. It will cause a serious hit on the usability of the blockchain network.

Scalability

Let’s say that the featured gas fees are low enough to satisfy an average crypto user when they make a crypto transaction. A fee such as $0.25 per transaction instead of paying an 80 times higher amount would certainly make the Ethereum traders happy.

With the featured technology, the Ethereum network is capable of processing only 15 transactions per second. Just as a comparison, VISA conducts around 1,700 transactions per second. This is more than 100 times Ethereum’s non-upgraded platform version.

If decentralized applications are set to become the future financing, they should at least be as close to traditional tools like VISA. This isn’t something that only Ethereum need to work on, but also Bitcoin, which processes 5 transactions per second.

It’s difficult to imagine a top cryptocurrency like Ethereum to be as scalable as a traditional financial institution. This is of course due to the slow transaction speed.

However, using blockchain technology still feels much faster than going through the required banking procedures. With cryptocurrencies, the user needs to input their wallet address, type in an amount, and confirm the transaction.

Even Bitcoin, the first crypto coin, seems much quicker than bank wire transfers. But, still, when the scalability solutions arrive, there will be many more reasons why people should start using decentralized payment methods.

Sustainability

Media outlets attack the proof-of-work consensus mechanisms as unsustainable because of the environmental impact. But, to their own knowledge, there is proof that cryptocurrency doesn’t have a large-scale environmental impact.

Regardless of that, many will welcome decentralized ecosystems if they help create a more sustainable consensus mechanism. This is where proof-of-stake steps into the light, as it offers exactly that.

This advanced mechanism runs validator nods instead of mining. To mine blocks in proof-of-work, the ecosystem requires an immense electronic input. On the other side, running validator nodes to validate blocks will save a lot of energy, which makes it a more sustainable solution.

Ethereum 2.0, or Serenity, will have scalability, usability, and sustainability for all users to operate worldwide. It will also make DeFi apps such as Compound and Aave much easier to run. This is of course so, if this project is successful.

Not many users will trust the decentralized protocols as an alternative to traditional finance if a single transaction costs $100. One might also wonder about the widespread use of cryptocurrencies if it takes such an amount to sell a digital token.

We are hoping that Ethereum 2.0 will put an end to all these concerns and allow its users to continue operating smoothly.

Ethereum 2.0 Solutions

Many believe that Ethereum 2.0 will have next-generation blockchain solutions that will deal with these problems. It will solve the scalability by utilizing an alternative consensus mechanism. Or it may provide a new way where devices in a network will come to an agreement.

If devices from all around the world begin using Ethereum, then they will need to find a way to work together. The current consensus mechanism of this cryptocurrency, proof-of-work, relies on mining to validate data sets or blocks. These solutions usually come with certain issues that proof-of-stake can try to solve.

The Beacon Chain

The Beacon Chain is the solution that will coordinate the future Ethereum network. It will also be the one that presents proof-of-stake to the blockchain network. This system will set up shard chains that will increase the transaction speed and make the network much bigger.

With it, Ethereum will become more secure, scalable, and sustainable. The Beacon Chain will implement the proof-of-stake system onto the old Ethereum network, the mainnet.

It’s worth noting that this is Phase 0, which indicates that the Beacon Chain is actually the building block of Ethereum 2.0.

The Merge

This is the stage where the main Ethereum network will merge with proof-of-stake with the help of the Beacon Chain. It will be an event that will possibly create a much better Ethereum.

Currently, proof-of-work is still the system that secures the blockchain network by running in parallel with the new solution proof-of-stake.

With the merge, these two systems will intertwine and mining will stop securing the network. Also, according to Ethereum, this event will lead to endless shard chains as well as endless scalability.

Shard Chains

The shard chains will expand the Ethereum network’s load across 64 chains. It will also help with the endless scalability solution after the merge by keeping the node requirements low. In computer science, sharding is a way of splitting a database horizontally.

This will make the Ethereum’s load more manageable for the network. It does that by reducing the network congestion in the new shards or chains and by increasing the number of transactions per second.

Compared to the current 15 transactions per second, Ethereum 2.0 will project around 100,000 transactions per second. This is Shard Chain Version 1: data availability. However, Shard Chain Version 2: code execution will offer more features to shards such as account management and smart contracts.

Final Thoughts

As we’ve established, Ethereum is the largest crypto platform for the development of decentralized apps. Now, we the Ethereum 2.0 project, this blockchain network will try to solve many of its key issues.

This new upgrade will make this network remain relevant in the crypto market for years to come. Among the solutions that it will provide to the current blockchain are lower fees and faster transactions. It will also utilize the proof-of-stake protocol which is much more sustainable than the current proof-of-work.

Ethereum 2.0 will be the biggest test for this company as it will show whether it can continue its dominance or not. Only time will tell if this major step will be the right move forward.