Altair Upgrade— ETH 2.0
The world’s second most valuable cryptocurrency is undergoing a transformation!
According to the announcement on the Ethereum blog, the Altair chain upgrade is going to be launched on Ethereum Mainnet on October 27th at 10:56 am UTC. This upgrade is a significant step in the transition to proof-of-stake, giving developers a “low stakes warm-up” and further functionality on the Beacon Chain. While the puzzle that is the Merge seemingly moved slowly at first, it is beginning to fall into place all at once.
Need for Upgrade
Crypto developers have adopted the Ethereum (ETH) 1.0 blockchain for its decentralized applications with offerings, including lending, borrowing, pooling and trading as a service. Unfortunately, increased adoption has become a double-edged sword, resulting in high network congestion, increasing gas fees and slow transaction times. Moreover, validators prioritize users who are willing to pay the highest fees for their transactions. For example, the average transaction at the time of writing on crypto exchange Uniswap costs around $44 in gas fees.
Altair upgrade promises:
- to reduce the platform’s power consumption by 99.9% making it far more sustainable.
- solve the problem with gas fees by raising the platform’s processing ability from 30 transactions a second to potentially 1,00,000.
- making possible more sophisticated smart contracts than before.
What Does Ethereum Altair Mean For ETH 2.0?
The multi-phased upgrade aims to address the Ethereum network’s scalability and security through several changes to the network’s infrastructure — most notably, the switch from a proof of work (PoW) consensus mechanism to a proof of stake (PoS) model.
What is Proof of Stake?
Proof of stake will make the consensus mechanism completely virtual. While the overall process remains the same as proof of work (POW), the method of reaching the end goal is entirely different. In POW, the miners solve cryptographically hard puzzles by using their computational resources.
In POS, instead of miners, there are validators. The validators lock up some of their Ether as a stake in the ecosystem. Following that, the validators bet on the blocks that they feel will be added next to the chain. When the block gets added, the validators get a block reward in proportion to their stake.
Why ETH 2.0 wants to use PoS?
The Ethereum community and its creator, Vitalik Buterin, are planning to do a hard fork to make a transition from proof of work to proof of stake.
But why they want to switch from one to the other?
In a distributed consensus-based on the proof of Work, miners need a lot of energy. And these energy costs are paid with fiat currencies, leading to constant downward pressure on the digital currency value. Developers are pretty worried about this problem and the Ethereum community wants to exploit the proof of stake method for a more greener and cheaper distributed form of consensus. Also, rewards for the creation of a new block are different: with Proof-of-Work, the miner may potentially own none of the digital currency he/she is mining.
Prime Goals
As stated by Ethereum researcher Danny Ryan the primary design goals of Ethereum 2.0 are:
- Resilience: The network should still be live even when lots of nodes go offline.
- Security: Utilize crypto and design techniques that allow for the massive participation of validators in total and per unit time.
- Simplicity: Minimize complexity, even at the cost of some efficiency.
- Longevity: Make components either quantum secure or easily swappable for quantum secure counterparts when available. This will mean preparing the network for a future where Quantum computing is fully accessible.
- Decentralization: to allow for typical consumer laptops with O(C) resources to process O(1) shards (including any system-level validation such as the beacon chain). This will allow for more low-end devices to participate in the network as validators.
As with most recent Ethereum upgrades, new protocol updates do not affect ETH, or those partaking in the PoW consensus chain. Instead, validators staking on the Beacon Chain are required to update the latest version in order to prevent being stuck in an “incompatible chain”
The EIP-2982 abstract, drafted by Danny Ryan and Vitalik Buterin, highlights that the Altair upgrade will introduce “punitive penalties” to secure the network for vast security threats. Thus, in the protocol, penalties such as ‘slashing’ and ‘inactivity leak’ prevent malicious validation sequences, therefore ensuring network security.
Gearing up for ‘light client’ functionality
Developers have also affirmed the creation of validator “sync committees” through the Altair upgrade. In January, they decided creating these sync committees was an important step toward building out new Eth 2.0 software clients that can run with low computation and data costs.
These new software clients, called “light clients”, are envisioned to run at a fraction of the cost that would typically be required of a Eth 2.0 validator. Light clients are aimed at empowering more users to independently verify the Eth 2.0 blockchain, potentially from inside their own web browser, as opposed to through a centralized third party such as Infura.
Advantage of being the First Mover
Ethereum’s native token, Ether (ETH), is the second largest cryptocurrency globally by market cap. This means that its adoption — popularity and usage among users — is second only to Bitcoin. All in all, it has the first mover advantage.
Among three aspects of the blockchain ‘trilemma’ — decentralized, scalability and security — Ethereum already hits two, but scalability that thus far eluded the platform. Simply put, if there are too many users on the blockchain, it gets increasingly expensive to buy and sell things.
Cardano, Solana, Avalanche and others claim to address the issue with PoS. Without PoS as a competitive advantage over Ethereum, they’re unlikely to have as many developers flock to their respective blockchains — another facet where Ethereum is miles ahead. The question remains whether there’s enough ground for everyone to share because by 2022, they will all be on the same footing.
