A major update is about to take place on the Ethereum blockchain. This update is aimed at making the network faster for transactions and cheaper to use. These updates are necessary if Ethereum wants to scale and become a useful technology for mainstream transactions. Below is an overview of what’s new in Ethereum 2.0.

The first version of Ethereum was launched in 2015, and since then a lot of events have taken place in the life of the versatile blockchain. Not long after its launch, the fame of Ethereum spread across the entire blockchain ecosystem. It’s native cryptocurrency Ether (ETH) became the second biggest cryptocurrency, next to Bitcoin, within the same short period.

The growth of Ethereum has been linked to the fact that it serves as a platform where other projects can build their own decentralized applications (DApps). This use case alone has attracted a lot of users simply due to the fact that it provides the tools and environment to create blockchain solutions easily and at reduced costs.

The hardfork that caused a split in the Ethereum blockchain, giving rise to two versions, Ethereum (ETH) and Ethereum Classic (ETC), happened in 2016. These two, and many other tokens, can be purchased on Vertex.Market via a peer-to-peer marketplace. This was after the infamous DAO breach. The hardfork that will give rise to Ethereum 2.0 later this year is the next big event for the network and community.

What is Ethereum 2.0?

As mentioned above, for Ethereum to go mainstream, it has to scale in order to be able to compete with existing systems. Take for instance Visa, which needs a capacity of only 4,000 transactions per second (tps), yet it can perform as much as 24,000 (tps). That is the kind of competition that Ethereum faces to thrive in the payment settlement circle.

In the video below, Danny Ryan, core researcher at the Ethereum Foundation explains what Ethereum 2.0 is all about.

Another area of interest is the cost of settling these transactions, which is the same thing as the cost of mining. Currently, Ethereum runs a Proof-of-Work (PoW) protocol, like Bitcoin. This is highly energy consuming and has an impact on the environment as well. This is what the Ethereum community and developers are about to change. Ethereum 2.0 is a new version of Ethereum, whose network will be maintained using a Proof-of-Stake protocol.

PoW vs PoS

The PoW protocol is the first to be introduced in the blockchain ecosystem. It is the same kind of protocol that is implemented on the Bitcoin network. Here, miners compete to find answers to math problems through the processing powers of their CPUs. The process was straightforward and highly decentralized from the beginning. However, as time passed certain deficiencies began to show up in the PoW system.

Due to the high level of competition, massive mining farms and pools began to emerge. Instead of the normal system where individuals can quietly mine away in the privacy of their rooms, Bitcoin mining became an industry of its own. This caused a lopsided effect, and the network is quickly becoming vulnerable to the 51% attack. This is a scenario where any individual or group that controls over 51% of the nodes can take over control of the network. This is anti-decentralization.

By running the same system, even Ethereum is not spared. Therefore, the network is moving away from the PoW system to the PoS protocol. A protocol that is maintained using the masternode system where members of the community contribute stakes in ETH tokens. The amount of reward that anyone gets will also depend on the percentage of stakes held.

The PoS masternode system gives room for a more distributed ownership. This is because the cost of mining is drastically reduced. There will be no need for expensive infrastructure or high energy consumption. This is the new direction that Ethereum is going and a strong element in the overview of what’s new in Ethereum 2.0.

The Benefits of Ethereum 2.0

The implementation of the new version of Ethereum will be in stages. The PoS revolution will not be sudden. Instead, through a gradual process the existing PoW system will be eased out as a new era emerges. This means that we will have a period where both PoW and PoS protocol will be functional on the Ethereum network.

Some of the features that will be enabled by Ethereum 2.0 include the following:

Even though the network might become less efficient, the extent of complexity will become highly minimized.

The risk of downtimes will be eliminated, especially during network partitioning or even when a large number of nodes go offline.

The new protocol will accommodate more validators and encourage the participation of a larger part of the community.

It will lower the barrier of entry, making it possible for smaller users with just their laptops to become stakeholders and be involved in decision making processes within the Ethereum network.

Conclusion

Apart from the PoS implementation on the Ethereum network, several other basic solutions have been lined up to be added on the Ethereum network. Under the mining processes are solutions like Beacon and Casper. These two will address the security of the system and how the coins are created.

The other solutions that will address various aspects of the Ethereum network include Sharding, eWASM, Plasma, Raiden, etc. These are all part of the elements that are involved in the overview of what’s new in Ethereum 2.0 which is set to be launched in the near future.