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What is Ethereum 2.0 and why is it so important

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When in 2015 Ethereum has entered the main net, aroused the interest and excitement of a large part of the developer world, and of course also investors. Their expectations had to soften somewhat as scalability and security issues began to show up in the protocol. Improvements were made to the code, and development never stopped, but it soon became clear to everyone that Ethereum needed a complete overhaul to be competitive in the future. to have it completed in the future: thus Ethereum 2.0 was born, with its “code” name Serenity.

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Let's go see what Ethereum 2.0 is and find out all the interesting details.

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The brief description of Ethereum 2.0

Ethereum 2.0 Serenity, as described by Preston Van Loon, is a different blockchain than the current Ethereum as we know it. In itself it is an Ethereum upgrade, which though it will not require a hard fork of the original chain.

How will you be able to access Ethereum 2.0? A deposit will be made One-off of Ether from the old to the new chain through Smart Contracts. This will be a one-way transaction, after which use of the legacy Ethereum system should cease.

As I said at the beginning, Ethereum has already undergone some updates that led it to be less congested and more scalable, precisely in anticipation of the release of Ethereum 2.0. These changes have spectacular names: Homestead March 2016, Metropolis Byzantium October 2017, Metropolis Constantinople February 2019, and Istanbul December 2019.

The problems of Ethereum, which Ethereum 2.0 wants to solve

We understood the reason behind the change: the current design has many, too many limitations. The algorithm Proof of Work and other parts of the architecture have never been able to cope with developer demand.

Some of the main problems are:

Scalability: it is a known fact that the world computer (the main focus of Buterin and his Ethereum creation) is slow. Right now, the protocol is overwhelmed with all the decentralized applications (DAPPS) and the Smart Contracts running through it. Some improvements were made on this front, but it became clear that a Proof of Work blockchain could not cope with demand.

SafetyThere have never been any significant security breaches in Ethereum, but some improvements are known to benefit the health of the entire system. This is a goal for Ethereum 2.0, which aims to create a more robust platform.

A new virtual machine: one of the great innovations of Ethereum was the release of a virtual machine. This is the part that runs the smart contracts and makes the protocol a worldwide computer. The problem is that this part is also very slow. This is a big problem because every transaction in Ethereum updates the global status of the network. Right now, the EVM (Ethereum Virtual Machine) is a bottleneck in the system.

What will change with Ethereum 2.0?

Once the problems of Ethereum 1.0 have been outlined, we can look at what improvements Ethereum 2.0 will bring. Keep in mind that these improvements are at a very advanced stage of planning, the actual development, although partly already started, is yet to come.

Proof of Stake: Proof-of-Stake consensus algorithm is the biggest change to come with Ethereum 2.0. This mechanism uses stake instead of electricity as a measure of validity.

  • In a Proof of Work blockchain, the chain with thehash power the higher the better.
  • In a Proof of Stake blockchain, the chain with the most resources in stake it is the best.

Furthermore, validators become the new source and also block propagators. These are users who have tied up at least 32 ETH. These resource staking allows the validator to enter a lottery to be selected as the creator of the next block and thus be able to claim his rewards. If a validator goes offline or acts dishonestly while it is an active part of the network, some or all of the Ether used to become a validator will be stripped from it.

ShardingAnother big change in the system is the use of side chains known as shard. Earlier I said that the slowness of transactions, the congestion of the network, is one of the major problems of the current system. In its existing architecture it seems that there is no definitive solution. For this reason, creating separate smaller chains (shards) that can deal with individual trades is a fantastic idea and a significant improvement. Polkadot has been doing this since she was born.

What is the Ethereum 2.0 RoadMap

Like Ethereum 1.0, Ethereum 2.0 will also be launched in four phases:

  • Phase 0: launch of the new proof-of-stake system (known as Casper) and development of the central Ethereum 2.0 blockchain (called Beacon Chain);
  • Phase 1: scale the capabilities of Ethereum 2.0 by dividing the network into 64 blockchains (known as shard chains) which will allow the network to process more transactions;
  • Phase 2: Enable the smart contract capabilities that will allow dApps to run on Ethereum 2.0, and form a bridge between the original Ethereum network and Ethereum 2.0; and finally
  • Phase 3: According to Ethereum founder Vitalik Buterin, this phase will be to “basically do other things we want to add once we get started”, but will actually host the change of the EVM (Ethereum Virtual Machine).

Phase 0: Proof of Stake and Beacon Chain

Still scheduled to be released in 2020, the Beacon Chain is a Proof of Stake network planned to work alongside Ethereum 1.0. It will only be launched if 524.288 in Ether have been staked, and at least 16.384 nodes have been registered as validators. Initially, the Beacon Chain won't be a big change for most users. This network will not host Dapps and will not run smart contracts. Its primary function will be like a register for validators and their part within the network.

Phase 1: Sharding

This phase is scheduled for one year after the finalization of Phase 0. In this phase, the single Chain of Ethereum 1.0 will be cut into smaller portions called shards. The expected number of shards is 64 in the initial launch. This phase is very delicate: it will allow to direct transactions in special sub-chains and allow parallel data processing.

Phase 2: Merger

At this stage the old Proof of Work mechanism should be incorporated into the new network as one of the shards, one of the sub-chains. Consequently, with this phase at any moment there will be no need to transfer records from one chain to another. The transaction history of the PoW chain will live on as part of Ethereum 2.0. This should happen shortly after the completion of Phase 1.

Phase 3: EWASM

In this phase, shortly after the two Ethereum 1.0 and Ethereum 2.0 chains have been merged, the Ethereum Virtual Machine will be replaced. There aren't many details regarding this phase, but the new virtual machine will be called Ethereum WebAssembly (EWASM), since it would be based on the web assembly format.

With this update, Dapp hosting and smart contract execution will be in full swing in Ethereum 2.0. This means that we will be able to judge the update finished only when Ethereum has not completed this phase.

The road is long and winding, but the capabilities of the new Ethereum 2.0 have made the mouth water of many. The world will change. This is a major update that will not only benefit Ethereum users, but will also propel the industry as a whole into the future.

Impact on the price of ETH with the Ethereum 2.0 update

Many believe that Ethereum has the ability to catch up and surpass Bitcoin. I think so too. This would mean an increase in its value of 20 times ... by the way:

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