Within the crypto sector, projects and networks are always in flux. Cardano (ADA) goes launching smart contracts soon, Ethereum (ETH) launched recently the important London update and ETH 2.0 is on the horinzon; these are all developments that bring us one step closer to a decentralized and fair world. In Timo’s take this week, I explain what Ethereum 2.0 is and how this major update will come about.
Ethereum (ETH) goes from mining to staking
Ethereum is currently running on a so-called proof-of-work (PoW) protocol. That means that ether miners have to solve complicated calculations to be allowed to process transactions, just like with Bitcoin (BTC) So. This mechanism works well in terms of censorship resistance, but if we look at the energy consumption and scalability of such a network, it is less future-proof. Ethereum has been struggling with extremely high transaction costs as a result for a long time, which is why Ethereum developers are working on a major switch.
The network will switch to a proof-of-stake (PoS) network. In this column I explain how this works at Cardano, but it’s similar to where Ethereum is going. Within this network, it is no longer the miners who process transactions but strikers, users who lock their ETH to contribute to the security of the network. The great thing about PoS is that anyone can participate. You no longer need expensive mining equipment that consumes a lot of electricity.
The old Ethereum network will end up in Ice Age
The switch from Ethereum to the new network is a mega job. A lot can go wrong that can cause enormous damage. The developers are therefore tackling this thoroughly by doing it in steps. The first step was the launch of the Beacon Chain last December.
This is a new blockchain on which PoS is already activated. That network now runs parallel to the original network and it is already possible to stake ETH there. There is already 7,000 ETH worth more than $22 billion tied up on this chain. So there is definitely confidence!
The next step is “the merge,” the merging of ETH 1.0 and 2.0. At that point, Ethereum is officially a PoS network and the old network will end up in an “Ice Age” thanks to the difficulty bomb. This bomb makes mining ETH impossible, so miners cannot happily continue with Etherem 1.0.
Not one, but 64 chains
With the above updates and forks energy consumption is drastically reduced. But it doesn’t necessarily improve Ethereum’s capacity yet. Shard chains We need to make Ethereum even faster and more efficient because not a single chain does all the work, but several.
A total of 64 chains will share the work. As a result, the barrier to entry to participate in the network with a node low because you no longer have to keep track of the entire network (so good for decentralization). The intention is even to give people the opportunity to run Ethereum on a simple laptop or phone.
So, Ethereum has a very interesting time ahead of it. The merge is expected to take place this year and shard chains are coming next year. The network will therefore become faster, cheaper and more sustainable at that time. But the big question is; will Ethereum remain the smart contract king?
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