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Ethereum 2.0 - The upgrade of Ethereum blockchain is on the way

At the beginning of the crypto world, the clear consensus choice has been Bitcoin, which has sat on top of the market capitalization charts from the earliest days. However, most experts and techies don’t expect it to last. As the Ancestors of all cryptocurrencies, the Bitcoin and blockchain is beginning to show its age. It affects a variety of real-world limitations, not least of which is its inability to scale. 

So, the variety of alternative blockchain implementations have evolved up to solve some of the above inherent problems associated with Bitcoin’s blockchain, The one notable thing is Ethereum 2.0

What is Ethereum 2.0?

Ethereum 2.0 is the next upgrade of the Ethereum blockchain and it is called ETH2 or serenity. Ethereum 2.0 will be released in three “Phases”. Phase 0 is starting in the year 2020. Each phase will improve scalability, security, and usability for the network.

Difference Between Ethereum and Ethereum 2.0:

There are two important improvements introduced by ethereum 2.0. 

1. PoS( Proof of Stack)

2. Shared Chains

Proof of Stack (PoS) : Proof of Stake (PoS) is an upgrade from Ethereum 1.0. Currently, ethereum1.0 is running on proof of work concept. PoW requires physical computing power (programmers or miners) and electricity to create blocks on the blockchain. Proof of Stake (PoS) is an upgrade that improved security, scalability, and energy efficiency. Instead of depending on physical miners or programmers and electricity, PoS depends on virtual miners and deposits of ether.

Shared chains: Shared chains is a form of database partitioning, also known as horizontal partitioning, wherein larger databases are divided into smaller, it is used to reduce data burden and improve scalability. On Ethereum 2.0, sharding will take the form of 64 chains running alongside the beacon chain and increasing overall throughput and scalability.

Type of phases of Ethereum 2.0?

Ethereum 2.0 is planned to be launch out in at least three phases: Phase 0, 1, and 2. Phase 0 is planned to launch in 2020, with Phases 1 and 2 to be released in upcoming years.

Phase 0: In the first phase of Ethereum 2.0, is called “Beacon Chain”. The Beacon Chain manages and stores the registry of a virtual miner, and will implement the Proof of Stake (PoS) consensus mechanism for Ethereum 2.0. The Ethereum (PoW) Proof of Work chain will continue to run alongside the new Ethereum PoS chain, ensuring there is no drop in data continuity.

Phase 1: The second phase of Ethereum 2.0 will likely release out in 2021. The main improvement of Phase 1 is the integration of shard chains. Already we have seen about the shard chain above.

Phase 2: The third phase of Ethereum 2.0 will likely be rolled out in 2021 or 2022. This phase is currently less clearly defined than the other two phases 0 and 1 but will involve in enabling transfers and withdrawals, adding ether accounts and, implementing the contract calls and cross-shard transfers, building execution environments. So that scalable applications can be built on top of Ethereum 2.0 and bringing the Ethereum 1.0 into Ethereum 2.0 so that PoW can finally be turned off.

What will change and improve when Ethereum 2.0 is launched?

The primary benefits of Ethereum 2.0 is scalability, usability, and security of the Ethereum network. Ethereum 2.0 will not remove any of the data like transaction records, history, or asset ownership of the Ethereum 1.0. The Beacon Chain will be the backbone of Ethereum 2.0. It will be fully functional with the existing Ethereum 1.0 chain. 

While launching the Ethereum 2.0 phase 1, the current plan of Ethereum 1.0 to effectively become the first shard on Ethereum 2.0. Until then, the Ethereum 1.0 will continue as it is now and will undergo improvements to enable it to eventually to be an Ethereum 2.0 shard.

What are the risks of staking Ethereum and becoming a virtual miner on Ethereum 2.0?

An upside to participating as a virtual miner is that you can earn rewards of ethereum. There is, however, a risk of losing funds through the ‘slashing’ of your staked ethereum on the network. With a little care, this risk is negligible. 

The first way a virtual miner or validator may lose funds by going to offline and not performing their duties correctly. This incurs a relatively mild penalty. As long as you are currently participating for at least 50% of the time, you will not lose your stake. The other way a validator can lose funds is to publish contradictory information about the chain. 

In this case, the virtual miner is slashed and ejected from the system. Depending on other factors, the amount of slashed is between 1 ETH and the entire stake amount, . Being slashed is easy to protect against and ought never to happen unless a validator is deliberately acting maliciously.

Finality and Slashing :

Finality: The finality is an offering by the PoS. After a small span of time, a block is declared final, which means that it can never be changed. All the transactions in that block and all previous transactions are immutable, permanent, and guaranteed forever. PoW chains offer much weaker guarantees around the finality

Slashing: Ethereum 2.0’s consensus mechanism has a couple of rules that are designed to prevent attacks on the ethereum network. If any virtual miner found to have broken these rules, then they will be slashed and ejected from the network. Slashing means that a significant part of the virtual miner's stake is removed. Slashing only affects validators who misbehave deliberately.

 

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