Everything you need to know about Ethereum 2.0

Ethereum 1.0 is the currently active Ethereum blockchain and was developed by Vitalik Buterin. One of the well-known properties of Ethereum is the ability to host smart contracts. In addition, it gives developers the space to develop any decentralized app (dApps) that can run on the blockchain. Any app, regardless of programming language, can be integrated with the blockchain with the Ethereum Virtual Machine (EVM) software.

The mentioned “open source” properties have made Ethereum, with hundreds of apps on one platform, extremely popular. However, blockchain runs on a Proof of Work (PoW) consensus mechanism. Unfortunately, the mechanism has a serious flaw in terms of scalability and speed. The answer to this shortcoming is Ethereum 2.0.

One of the biggest reasons for the upgrade is scalability. Switching from Proof of Work (PoW) to Proof of Stake (PoS) is most important in the planned upgrade. The swap will boost decentralization by making the entry of validators easier. In this article you will learn everything about Ethereum 2.0 and the different phases.

Ethereum 2.0 (ETH2)

Ethereum 2.0, also known as “Serenity”, is an extension of Ethereum 1.0 (public Mainnet) with the aim of increasing Ethereum’s operational capacity and attracting as many users as possible.

The extensions will be implemented in phases, with the first milestone expected in 2020.

Expected upgrades to Ethereum 2.0

The following points for change are planned.

Phase 0: new blockchain and PoW to PoS change

This first phase is planned for 2020 and consists of two important steps:

Creation of The Beacon Chain

A new chain is the first step in the transformation of Ethereum 1.0. The phase, dubbed “beacon chain”, comes with the idea of ​​a new Ethereum blockchain, the most important step in the upgrade. The platform will be the brain that controls the sub-chains (shards), expected in phase 1.


Eth2 will have parallel sub-chain (shards) partitions that work on their own and thus improve the operational capacity of the whole system.

Each sub-chain has its own validators, which create blocks and send them to the beacon chain. The beacon chain will synchronize critical data between the connected shards and turn the entire Eth2 into a robust but correlated blockchain.

Initially, the new chain validators will register and manage their deployed ETH. Its main task, to ensure consensus with the other parallel shard chains, will follow in the next phase.

In the new chain, a validator must stake 32 ETH in the beacon chain to be eligible to generate new blocks and receive rewards in ETH. So instead of mining, users can use staking to find blocks and earn Ethereum. With the current Ethereum exchange rate, this is an investment of approximately $ 12,000.

At this stage, the new chain will not be active for Ethereum users, as validating transactions, connecting to dApps and executing smart contracts will be inactive functions for now. In phase 1.5, the beacon blockchain will merge with the old Mainnet blockchain.

Beaconchain testnet statistics

Switch from Proof of Work (PoW) to Proof of Stake (PoS)

The main change identified for this phase is a transition from the Proof of Work (PoW) to the Proof of Stake (PoS) mechanism.

The current Ethereum blockchain, Ethereum Mainnet, runs on PoW. In PoW, every miner has a node. The miners use video cards to solve math puzzles in a race to get ahead of each other to mine the next block. Just like miners do on the Bitcoin blockchain.

Due to the huge computer and power resources required to place a block in a chain, there is a high level of security on the blockchain. Due to the enormous amount of financial resources required to participate in a mining pool, this is not done by everyone. So hacking a PoW chain would be next to impossible. PoW blockchains, however, have problems with capacity and accessibility.

The ability to process transactions faster cannot be improved because blocks are mined in a consecutive order, not in parallel. So, for a certain time there is only a certain number of blocks that can be processed. This delay is one of the challenges that will be addressed in phase 1.

In addition, there are barriers to entry for individual miners who, due to the required resources, must join a mining pool.

In Eth2, validators replace the miners who will not need computer and power resources to join the team. However, they will have to make a financial commitment (stake) on the blockchain. The amount is 32 ETH per validator, which is reasonable compared to the previous scenario. This is the minimum and can therefore be more.

  • Overview of where you can buy Ethereum.

16,384 is the lowest number of validators. The reason behind this significant number is to ensure an optimal level of security and decentralization.

Phase 1: Scalability upgrade

Scalability in the crypto world refers to the ability to achieve a faster transaction per second (TPS) rate by retuning the consensus mechanism or another system setting.

The main barrier to Ethereum 1.0 scalability is the Proof of Work mining mechanism. The next block in the sequence cannot be mined until the current block’s mining process is completed. A single block can only contain a limited amount of data. The limited number of blocks processed in a certain period of time affects the Transaction Per Second (TPS) speed.

The capacity of the current Ethereum blockchain is approximately 30 TPS. This capacity is relatively slow and regularly causes delays and congestion. Ethereum 2.0 improves blockchain capacity up to 10,000 TPS, about 5 times what VISA can handle.

Reaching 10,000 TPS is only possible by setting up parallel sub-chains, where the blockchain has multiple independent sub-chains (shard chains). The independent shards can process transactions and simultaneously send them to the beacon chain for synchronization with the rest of the blockchain system.

Setting up PoW shard chains in Eth2 will be completed in 2021 if all goes to plan. The plan is to set up 64 parallel shard chains, with perfect real-time integration. The chains will share the transaction burden and increase the processing speed of transactions. We expect this to be postponed, as is phase 0.

Phase 1.5: Fusion of PoW and PoS

The current Ethereum 1.0 is still a PoW blockchain. Even in the wake of Eth2’s beacon chain and sharding, it will continue with its PoW activities. It is important to note that it will take time for Eth2 to process transactions and support smart contracts. In theory, the plan is to merge the old PoW Ethereum Mainnet with the new PoS Ethereum 2.0 by making the PoW Ethereum Mainnet one of the 64 shards in the modern parallel system plan.

So it loses its PoW attributes and miners will no longer perform transactions on the blockchain. The PoW PoS merger is planned for phase 1.5 of the Ethereum 2.0 upgrade planned for 2021. If a solution is found for the scalability problem of PoW, the blockchain would still suffer from insufficient decentralization.

Due to the enormous computing power required for mining, there is a risk of monopoly formation, as it is possible that only a few people would have the necessary resources. With PoS, validators are chosen based on the number of coins they have. With PoS, a validator will be able to mine with the typical consumer PC.

Phase 2: fully established shards (2021-2022)

The implementation of shard chains is in the previous step. However, in the initial phase the chains will only have enough capacity to hold transaction data. The blockchain is incomplete without including smart contracts.

This phase will turn the shard chains into full-fledged units that allow for smart contracts to be accepted. The introduction of Ether accounts and their transaction options, such as “sending” crypto to other wallets, is also part of this development.

The development of a system environment suitable for hosting the scalable dApps expected on the new Eth2 platform will also be part of this phase.

In summary

The growth in the blockchain landscape faces three challenges. Improving security and increasing scalability are the main points of attention. Reducing centralization is the other concern. Ethereum 2.0, for now in theory, appears to be able to handle all three.

With an ambitious plan to add more shards on top of the original 64, Ethereum 2.0 promises an impressive scalability plan. The expected PoS staking system is secure, as validators lock their ether with the expectation of mining a block. If they are fraudulent, they run the risk of losing their Ether and unable to make any more transactions. PoS validation technique based on the amount of stakes will end the PoW monopolistic tendencies.

The Ethereum community remains predominantly optimistic about the new “Serenity” developments.

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