What is Ethereum 2.0: the cryptocurrency is reborn with a new blockchain, more transactions and goodbye to mining with GPUs

Ethereum

Ethereum is the second cryptocurrency by valuation, but it has always been the eternal second. It occupies a discreet background, overshadowed by that fascinating phenomenon called bitcoin , but now it wants to become a much more obvious reference with its new version.

That is the purpose of Ethereum 2.0 “Serenity”, a new iteration of this cryptocurrency that is reborn with a renewed blockchain in which efficiency, scalability and the number of transactions per second (to enable payments) are improved and in which one of the charms he was born with disappears: no more ETH mining with GPUs .

Ethereum 2.0 is born, but has yet to grow

A simple tweet announced the long-awaited birth of Ethereum 2.0. There was therefore the so-called “genesis” of this cryptocurrency, which now reaches a new version much more focused on scalability and efficiency.

Genesis, again. # eth2 https://t.co/teiIbNy0oO

Ethereum (@ethereum) December 1, 2020

The fundamental difference between Ethereum (1.0) and Ethereum 2.0 is in the consensus mechanism that allows adding new blocks to the blockchain. Whereas in the “old” version a proof of work (Proof of Work, PoW) was used , now a Proof of Stake (PoS) will be used.

As explained in Decrypt , in the blockchains used by cryptocurrencies such as Ethereum, transactions need to be validated in a decentralized way. Let’s see the differences in the systems to do it.

Goodbye miners

Until now Ethereum used a PoW mechanism in which miners used hardware such as GPUs to process complex mathematical problems that allowed to verify new transactions: the first to solve the puzzle receives cryptocurrencies , but this process usually consumes a large amount of energy.

In the new PoS philosophy there are no miners, but transaction validators that must have a certain stake (currently 32 ETH, about 15,800 euros at current value) in this system in order to verify them. These validators are selected when proposing a block according to their participation in the cryptocurrency and the time they have been investing in it.

Ethereum cryptocurrency

When enough validators confirm that block, it can be added to the blockchain, and the validators are rewarded, a process known as “forging” or “minting.” Traditional mining disappears , and mining farms based on ASICs (as is the case with bitcoin) or GPUs (as was the case with ETH and continues to occur with cryptos such as Monero, Litecoin, Ethereum Classic or ZCash) will not be able to be used to obtain Ethereum.

The fundamental advantage of PoS is that it is much more energy efficient than PoW but it also makes it possible to guarantee the security of the blockchain in a much more efficient way.

More transactions point to a future where we can buy with ETH

One of the limitations of cryptocurrencies such as bitcoin or Ethereum was their low number of transactions. Ethereum’s was somewhat higher, but so far it was around 30 transactions per second.

That rate is very poor if you want to transform ETH into a cryptocurrency with the potential to be able to buy goods with it , but with Ethereum 2.0 things change, since it will be possible to reach up to 100,000 transactions per second.

Those responsible for the modification of the renewed cryptocurrency also emphasize that the security is also much higher . Ethereum 2.0 requires that there be a minimum of 16,384 validators for each transaction, many more than other PoS networks. Decentralization is much greater, and apparently so is the security achieved with this proposal, although there are also doubts about potential problems to be solved.

The launch of the # Eth2 Beacon Chain is characteristic of the emergent, open-source ethos that attracts so many to Ethereum in the first place. More than 27,000 validators from around the globe are now participating in the new # Eth2 consensus model

Joseph Lubin (@ethereumJoseph) December 1, 2020

Everything certainly looks promising for Ethereum 2.0, which was effectively born yesterday but is still in full swing. In fact, there are three different phases to reach a fully mature Ethereum 2.0:

  • Phase 0 : the one that started yesterday. The new Beacon Chain that stores and manages the validator registry and the PoS consensus mechanism is implemented. At the moment, the original Ethereum 1.0 PoW blockchain is still active for data continuity.
  • Phase 1 : this new stage is expected to be reached in 2021 as the new network begins to be deployed, initially with 64 times the capacity and transactions per second of the current network. Later (it is expected that also in 2021) that network becomes fully effective and the definitive transition to the PoS consensus is made.
  • Phase 2 : by the end of 2021 or perhaps already in 2022 the new blockchain is expected to be fully functional and compatible with Smart Contracts. That will make it possible to add Ether accounts and enable both transfers and withdrawals of cryptocurrencies.

The future is therefore promising for a cryptocurrency that, as we say, although it was born yesterday, has yet to complete a transition period that will apparently last more than a year. Experts believe that this change will boost the value of Ethereum.

We will see if it does indeed do so and if this cryptocurrency manages to become a much more palpable reference in a segment that has recently returned a lot of news.

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