Ethereum 2.0 aims to enhance the speed and scalability of the Ethereum network so that it can process transactions more efficiently. This is important to ensure that the Ethereum network does not get congested and thus remains the most dominant and widely adopted blockchain and smart contract network in the industry.
The main reason for the upgrade is the issue of scalability. The current network can only support roughly 30 transactions per second, which causes issues such as network delays and congestion, which causes absurdly high transaction fees and even failed transactions.
Ethereum 2.0 is said to be able to process up to 100,000 transactions per second (TPS). This is achieved through the implementation of shard chains, which’ll increase in throughput significantly. This will help Ethereum rival processing systems like Visa and Mastercard, which can only process roughly 1,700 and 5,000 TPS respectively.
The multi-phased upgrade aims to make several changes to the Layer-1 infrastructure. The biggest change is the switch from a Proof of Work (PoW) consensus mechanism to a Proof of Stake (PoS) consensus mechanism. And while most PoS networks only have a small set of validators, which raises centralization issues, Ethereum 2.0 requires a minimum of 16,384 validators which makes it much more decentralized and secure than other networks on the market.
The total upgrade has been split up into several phases, with the first being named the “Beacon Chain'', having gone live in December 2020. This introduced staking to the Ethereum network, which is a crucial feature of the shift to a PoS consensus mechanism. Although it’s worth noting, that until the second phase, the Beacon Chain will exist separately to the Ethereum mainnet that is currently used today.
The second phase of the upgrade is called “The Merge”. It’s expected to come sometime in the first half of 2022. This will merge the Beacon Chain with the Ethereum Mainnet, becoming its own shard which uses PoS instead of PoW. This will bring the possibility of smart contracts to the new PoS system, plus the full history and current state of the Ethereum network. This will ensure that the transition is smooth for all Ethereum and ETH stakeholders.
This phase will signal the end of the PoW era for Ethereum and it will kickstart a more sustainable, scalable and eco-friendly Ethereum.
The final phase of the upgrade is Shard Chains, which play key roles in the scaling of the network. Essentially, this will spread the network’s load across 64 new chains, which’ll make it much easier to run Ethereum nodes because far less data will need to be stored and hardware requirements will be lowered.
Although Shard Chains are expected to be rolled out in 2022, we still do not have a clear and concrete date for this transition.
Ethereum 2.0 refers to a set of upgrades to the Ethereum network that will make it more scalable, secure and sustainable. The goal is to enable Ethereum to be adopted by the masses. In order to do that, the network needs to become more scalable and able to support thousands of transactions per second to make applications faster and cheaper to use. The upgrade will also make Ethereum more secure and decentralized. This is important because as adoption grows, the need to defend against all forms of attacks increases. Finally, Ethereum’s transition away from PoW and to PoS will be much better for the environment because the technology required to maintain the network will be much less energy inventive, making the network much more environmentally sustainable.