What is Ethereum 2.0, and How Will It Influence DeHive?
Ethereum 2.0 has been all over the news lately, with the latest testnet merge on August 10. The network is going through serious updates, and it’s no wonder that the final release will significantly influence the crypto industry.
Today, we’d like to take a closer look at Ethereum 2.0 and its influence on other tools and protocols, including DeHive. We will catch you up on what’s been going on with Ethereum and explain what to expect from the upcoming final merge.
What is Ethereum 2.0?
Ethereum 2.0, also known as Eth2 or Serenity, is an upgrade to the Ethereum blockchain that is to introduce a proof-of-stake algorithm to the network. The main goal of the upgrade is to enhance the speed, efficiency, and scalability of the blockchain so that it can avoid bottlenecks and process more transactions simultaneously.
It’s important to clarify, though, that the commonly used name “Ethereum 2.0” is incorrect. According to the team, the term “Eth2” is being phased out in preparation for the Merge. The key reason for that is the fact that after merging “Eth1” and “Eth2” into a single chain, there will no longer be two distinct Ethereum networks. Thus, to avoid confusion, the community currently refers to the chains as the “execution layer” (Eth1) and the “consensus layer” (Eth2).
What is the Ethereum Merge?
To transition from proof-of-work to proof-of-stake, the Ethereum team has designed a roadmap that helps facilitate the whole process.
The first stage of the transition was the launch of the Beacon Chain, which introduced proof-of-stake to Ethereum in December 2020. Since its genesis, the Beacon Chain has been working as a separate network from the Mainnet, but the ultimate goal is to bring the two networks together with the help of the Merge.
The Merge is the event of merging the current Ethereum Mainnet with the Beacon Chain proof-of-stake system. This will mark the end of proof-of-work for Ethereum, and the full transition to proof-of-stake, reducing Ethereum’s energy consumption by ~99.95%.
The Merge is planned for Q3-Q4 2022, with the expected date of September 15.
But even though the long-awaited Merge is the final stage of the proof-of-stake implementation, it’s not the last update of the Ethereum network. After the Merge, users should expect the introduction of sharding that is to be shipped in 2023.
The impact on other chains
So how will the consensus layer (Ethereum 2.0) implementation and the Merge event influence other chains and protocols?
Traditionally, Ethereum has been infamous for relatively high gas fees. High fees have plagued the chain since it gained popularity, especially in the last few years after the rise of DeFi.
To address this problem, various layer 2 networks have emerged. Such chains roll up multiple transactions into one, transfer them to themselves, and then return them back to the original layer 1 blockchain in their compact form.
It is believed that as Ethereum 2.0 comes in full force, transaction speed will increase while gas will cost much less. Thus, layer 2 blockchains will partially lose their significance and will have to provide other advantages for users.
Ethereum 2.0 benefits for users
Through the transition to the PoS model, Ethereum is expected to achieve greater scalability, thus, providing higher transaction speed and lower gas fees. Besides, this will improve the blockchain’s environmental sustainability since there will be no more energy-consuming PoW mining.
After the Merge, users will benefit from the following:
- Efficient crypto staking
- High transaction speed
- Low gas fees
- Higher scalability
- Higher security
We are sure that the switch to PoS will make Ethereum much more efficient and provide plenty of new possibilities both for users and protocols. What exactly should we expect? No one knows for sure, so we’ll have to wait and see for ourselves as the transition happens.
For DeHive and our users, Ethereum 2.0 will also bring new opportunities in the DeFi sector. Our team has low-key started preparation to release a new product based on the updated Ethereum features, so stay tuned😉