Upgraded algorithm
Ethereum has now been upgraded to version 2.0 which has brought a proof of stake algorithm and has merged with beacon chain an auxiliary function on the Ethereum network that provides better information about transactions.
Beacon Chain is an auxiliary feature at first glance but adds fundamental changes that are necessary for future upgrades such as shard chains. Shard chains and the sharding process are going to solve a big chunk of scaling problems.
Sharding is the sharing of transactions on multiple, smaller blockchains. These smaller networks will be able to be run by users with less hardware, as they will only need to store information from the specific shard and not from the entire network. This enables validation to be easier and more accessible, as well as less congestion on the network.
One feature that has been implemented with Ethereum 2.0 is the change from proof of work (PoW) to proof of stake (PoS) i.e., the lack of need of miners who were replaced by Validators. Validators are those who confirm transactions by storing the Ethereum blockchain on their computer. They are essentially another kind of nodes.
Why Ethereum 2.0?
Since its launch in 2015, the Ethereum blockchain has evolved into the most useddecentralized network that facilitates the exchange of value, the creation of dApps, and the creation of other open systems without permission. This increased interest has pushed Ethereum’s capacity to its limits. As demand is expected to increase, there has been a need to rethink and redesign the network architecture to ensure it meets its potential to serve all mankind.
ETH 2.0 is the result of a long-term planning on the Ethereum roadmap, aimed at allowing the network to process more transactions while increasing security and enhancing decentralization. This is a huge undertaking that requires a lot of innovation and significant changes to create innovative solutions that offer more benefits to users.
Features and Benefits of Ethereum 2.0
One of the major changes to be implemented in ETH 2.0 is the transition from the proof-of-work consent (PoW) mechanism to an evidence-of-stake (PoS) mechanism. This will change the way the network works in many ways. It will change the transaction validation mechanism from mining to staking, a move that will make the network more secure. Validators will need to lock 32 ETH (approximately $12,500 at the time of writing) in order to run a node. Validators will be randomly selected and rewards will be issued for each successfully verified block added to the network.
In the same vein, penalties will be imposed on players who attempt to harm the network. This is expected to enhance security as bad actors may lose some or all of their share for their efforts.
Also, foreclosure rewards for validators are reduced if they don’t stay firmly online. This is intended to motivate them to keep their nodes alive throughout, thus keeping the network secure.
A transition to the PoS consensus mechanism will also reduce grid power consumption, as validators don’t need huge amounts of computing power to participate. This is a welcome bonus considering the ever-growing concerns about the massive power consumption of PoW networks like Bitcoin.
ETH 2.0 will introduce shard chains that are expected to significantly enhance its capacity and scalability. Shard chains act as additional strips that allow transactions to be processed simultaneously rather than sequentially. This feature will allow Ethereum to handle more transactions per second (TPS) through parallel processing. Network performance will increase dramatically from the current 15 transactions per second (TPS), as 64 chains of scrap are scheduled for deployment on ETH 2.0.