[Insight] Unveiling Ethereum 2.0, What Will Be Change?
About the question from the Consensus 2020 held in May, which was “(Will Ethereum 2.0) really coming in July?”, the answer from Vitalik Buterin, the founder of Ethereum, was “I think so, yeah,” However after that interview, Buterin said that he didn’t hear or mentioned the word ‘July’ from the question. He admitted his mistake and continued, “My actual stance is that Ethereum 2.0 is ‘on track’ in that there aren’t any unexpected bumps in the road”. Then, in August, he admitted that the technical implementation of Ethereum 2.0 is difficult than he expected.
Soon afterward, the news that Ethereum 2.0 will be released in December has finally announced on 5 November, and this led to the active activities from the Ethereum Network, resulting in more than 10 thousand Ethereum gathered in contracts.
What is Ethereum 2.0?
Ethereum 2.0 (ETH 2.0) is one of the main phases of the upgrades to the Ethereum network. ETH 2.0, also known as Serenity, is based on shifting from proof-of-work (PoW) to proof-of-stake (PoS) consensus. It also offers several improvements to Ethereum’s current protocol, “Layer 1”. The ETH 2.0 upgrade will also bring in sharding, PoS, a new virtual machine (eWASM), and more to the network. However, the release of ETH 2.0 does not mean that all the offerings will be given at once. The key feature of the upcoming ETH 2.0 launching in December is expected to be PoS deposit.
The industry expects that ETH 2.0 will improve transaction speed and throughput while at the same time reducing the fees substantially. They forecast that the deposit-based PoS will show great improvements in such features, unlike the PoW that is operating on the base of mining power. Currently, the Ethereum Foundation announced that ETH 2.0 will officially start its operation at 1 December 12:00 UTC through its blog post. However, in order to do this, they require 16,384 validators depositing 520,000 ETH. At first, the development team scheduled the genesis block mining time for ETH 2.0 to 3 January, 2021, the 12th anniversary of the launch of the Bitcoin network, and then make it one month earlier. It seems this could be the result of the public opinion that the launch of ETH 2.0, first set in July, has already been delayed long enough. The further details of the story can be found from the records that Afri Schoedon, developer of the testnet, left in GitHub.
Could ETH 2.0 Be The Solution for the Scalability Issues?
Scalability is one of the long-standing issues in blockchain platform projects. Roughly speaking, scalability means the handling speed of the network. According to the report published in May by Hexlant, the main focus of ETH 2.0 will be improvements in security, scalability, and decentralization. The most expectation is focused on that ETH 2.0 will bring a tremendous change in scalability, which means the speed that was the most underwhelming feature in the existing network. As a response, Vitalik Buterin said, “ETH 2.0 will scale to 14,000 transactions per second (TPS), which means 1,000 times faster than before.” If so, this may prevent the slowdowns in transaction speed and cease the charging of the expensive commissions due to the congested network.
Then, how ETH 2.0 will solve the problem? This can be achieved through shifting PoW to PoS consensus algorithm. Furthermore, the aim of the ETH 2.0 is to bring decentralization through the application of the PoS-based compensation system. This means that they will introduce a system that will give validators compensation for their deposits. According to Ethereum, the PoW mechanism allowed only a few to become miners, making the entry barrier for the field high. However, in ETH 2.0, everyone can be the validator if they have only 32ETH.
Launching in December, but Far from Over
However, experts believe that even the mining of ETH 2.0 genesis blocks start in December, there would be no notable changes for the moment. They forecast that it will take years for ETH 2.0 to settled down.
In the interview with Decrypt, Tim Ogilvie, the CEO of Staked, a digital asset (cryptocurrency)-tech firm, said, “No key functions of Ethereum will be implemented in the current phase (Phase 0).” He also pointed out, “It is impossible to transmit ETH or participate in other smart contracts such as DeFi,”
According to Hexlant, the Ethereum 2.0 roadmap revealed in GitHub consists of six phases, and the features of the ascertainable phase 0 to phase 2 are the following. Phase 0 will be the Beacon Chain Stage that will allow the implementation of an independent PoS network and establishment of the mechanism for creating and suggesting blocks through the stakes of validators. In Phase 1, the Shard Stage it will introduce a scaling solution that will divide the network into at least 64 shards. This will result in a faster transaction proceeding speed and the increased throughput. In the next stage of Phase 2, the EWASM Stage, a new virtual machine upgraded one-step ahead compared to the existing Ethereum virtual machine (EVM) will be introduced. This means that the quick-speed transaction with Ethereum will be available at least they reached Phase 1. According to Hexlant, the realization of the complete Smart Contract Feature will be available only when they reach Phase 2.
In Phase 0, as the deposit contracts will be one-sided, so it will be impossible to return Ethereum once transmitted. And if the users transfer more than the deposited amount, they too will receive the rewards for the 32ETH. The rewards will be tied to the Beacon Chain until the development of Phase 1. It seems the Withdrawal will only be available after the implementation of Phase 2.
Ogilvie, the CEO, foresaw that the time estimates for Phase 1 will be six months at best and will take two years for Phase 2. Even the co-founder, Buterin, also said that they need to cling to the existing method for at least two years.
The Release Could be Delayed Even Further If Failing to raise USD 2 million?
There is one more variable remains. If ETH 2.0 fails to achieve the target amount by the end of the month, the launch date will be delayed inevitably. Ogilvie, the CEO, said, “Since the return rate of ETH 2.0 is significantly lower than that which provided in the existing ETH 1.0-based DeFi (decentralized finance) protocol, and it takes longer to withdraw the staked ETH, it is still possible that we may delay the launch of ETH 2.0.”
*This research and analysis document has been prepared for the purpose of providing information that can be used as a reference based on our reliable data and information, but we cannot guarantee its accuracy or completeness.
*The document has reflected the individual’s opinion and it may not be consistent with the company’s official point of view.