Ever since its introduction in the crypto ecosystem, Ethereum has always been a point of convergence due to its extensive networks over the Decentralized Structure. It is the next most exciting topic after Bitcoin with its approximate market capitalization of $ 470 billion. Lately, this profound name in the Blockchain space has been in highlight because of its geared-up motion of shifting to seminal Ethereum 2.0 to address and bridge the gaps in its existing model. However, the idea of Ethereum network upgrdation is not sudden; it has been in discussion and on the verge of implementation for more than half a decade before it reached its final stage now.
Ethereum2.0 is the most awaited upgrade to the network consisting of sequential phases where the Proof-of-Work (PoW) consensus mechanisms are transferred to Proof-of-Stake (PoS) to ensure more scalability, security, and sustainability. Ethereum is all set to catch up with the existing PoS blockchain like Cardano, Polkadot, Solana, Avalanche, etc.
This upgrade on the Ethereum network is termed Serenity. Its core objective is to improve transactions capacity on the network. For this purpose, it uses the sharding technique which is prominent in several other blockchain networks too and allows scalability without compromising on security.
With its recent reform, Ethereum plans to address multiple aspects of PoW consensus. As a result, a shift to PoS is meant to bridge the gaps with the PoW mechanism. Though the PoW mechanism is potent to solve complex computational algorithms and facilitate the addition of blocks yet it is an energy-intensive process. On the other hand, PoW needs hardware (computers) to compete against each other, process the complete transactions, and gain rewards. Thus, PoW is subjected to high energy and hardware requirement leading to increased gas fees and lower scalability. So, let’s understand how PoS is the solution to these arising concerns for PoW.
Presently while working on the PoW model Ethereum only stores limited data sets which further leads to an increase in pending transactions on the network. As a result, the addition of a new block gets delayed too which is why the Sharding method of data distribution over multiple machines is used. It is the method of segregating data into smaller units and making it more manageable which is the special attribute of the Proof-of-Stake Consensus Mechanism.
In PoW mechanism mining process is subjected to high entry barriers due to powerful computational requirements. Furthermore, if the number of miners increases in the network it leads to decreased profitability for individual miners. It encourages the creation of a centralization system where resources are collectively used to solve the puzzles. Hence, Proof-of-Stake addresses this issue by leveling the field for individual miners and replacing them miners with validators who stake coins and ensure their proper maintenance. These validators execute their part of computational responsibility and verify cryptocurrency transactions too. Additionally in Ethereum 2.0 Validators are required to stake 32 ETH in an official deposit contract.
The important shift towards Ethereum 2.0 is planned to be executed in three phases beginning from December 2020 and continuing till the end of 2022.
Here, it launched the beacon chain in December 2020 for managing the registry of validators who are responsible for creating block Ethereum 2.0. The beacon chain is the recent PoS blockchain which would be used by merging with the previous Ethereum network. It aimed to introduce the PoS for staking and establishing shard chains as a testnet for a full-fledged Ethereum 2.0 network.
This phase is expected to take an active turn between April- June in the year 2022. The Ethereum plans to implement shard chains throughout the network substantially. The merger of the two Ethereum networks aims to reduce the burden on the network and get it ready for Docking. Hence, this phase is planned to act as the bridge between Ethereum 1.0 and Ethereum 2.0.
After all the successful testing Ethereum becomes potent to support cross-shard interoperability in its newest version. Ethereum 2.0 allows networks to handle smart contracts and transactions by transforming them the completely functional mainnet. It is expected to be launched as a full-fledged Ethereum update any time in the later half of the year 2022.
The shift towards Ethereum 2.0 is expected to impact the Ethereum policyholders in a positive manner. The change would lead to decreased transaction fees and provide the opportunity to stake the coins and become validators on the network. Moreover, during the upgrdation process, there would be no loss of data and records on existing apps. The major purpose of the Ethereum 2.0 would be to replace the PoW mining structure with a PoS staking system and improve scalability, cost-effectiveness, performance, and security of the network in the long run.