What is Ethereum 2.0?
If the creation of Ethereum ushered in a new era of experimentation in financial applications, Ethereum 2.0 seeks to continue this progress by altering the network’s design. This includes migrating to a new consensus mechanism that will govern how transactions are approved by the network and its cryptocurrency is distributed.
But before we dive into its new iteration, it is important to understand how Ethereum, one of the most ambitious cryptocurrency projects to date, operates.
Ethereum was built to be a kind of operating system for hosting any number of custom assets and programs, called decentralized applications (dapps).
To create dapps, developers write programs, called smart contracts, and deploy this code to the Ethereum blockchain. These dapps are essentially large constructions of smart contracts that can be set in motion if and when specific outcomes are met.
Today, Ethereum uses proof-of-work mining (in which computers burn energy to solve puzzles needed to create blocks) to power its blockchain. Miners batch transactions into new blocks roughly every 12 seconds.
Using this design, the Ethereum blockchain currently processes 12 transactions per second over its distributed network, a figure that may prove higher once Ethereum 2.0 is enacted.
How does Ethereum 2.0 Work?
Who created Ethereum?
Ethereum was the brainchild of then 20-year-old Russian-Canadian Vitalik Buterin.
Ethereum Roadmap to 2.0
Developers are currently working on new Ethereum 2.0 features, to be rolled out during phases.
This phase saw the launch of the beacon chain, enabling ETH holders to become validator nodes and stake their ETH to earn additional income.
For the beacon chain to launch, 16,384 validators needed to stake a minimum of 32 ETH on the beacon chain, a milestone that occurred on November 24, 2020. The code was then deployed on December 1, 2020.
The beacon chain has limited functionality during phase 0 since there is no transaction or smart contract support.
This phase would split the Ethereum blockchain into 64 shard chains (a number likely to increase once the full version of Ethereum 2.0 is released).
Further, phase 1 will extend the beacon chain’s PoS consensus across all shards, allowing validators to create blocks on their specific chain.
While shard chains will still not be able to process transactions or smart contract support, they will be able to store Ethereum data.
In Phase 1.5, Ethereum will be merged into a single, unified network.
This phase will see the addition of the current Ethereum chain, which contains the full Ethereum history, as one of the shards in the new ethereum 2.0 system and fully transition Ethereum from proof-of-work to proof-of-stake.
This is the final phase of Ethereum’s roadmap to 2.0, where the upgrade will become the official Ethereum network.
Phase 2 involves adding functionality to shard chains, enabling them to process transactions and execute smart contracts so that dapp developers can deploy their applications on shards.
Other Ethereum 2.0 Resources
If you are interested in learning more about Ethereum, please visit Kraken’s “What is Ethereum?” pages.
If you want to learn more about the consensus mechanisms that power Ethereum and Ethereum 2.0, then the “Proof of Work vs. Proof of Stake” page is where you want to go!
Want more in depth information on other cryptocurrencies and blockchain projects? If so, visit our Learn Center to further your education on this ever-growing space.
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