Crypto Global

Ethereum 2.0

Dec 1, 2020

Ethereum 2.0 approaches milestone. In the last article we looked at the contract address 0x00000000219ab540356cBB839Cbe05303d7705Fa, which the Ethereum community has been watching with interest for weeks.

The big topic this week is that the transition from Ethereum 1.0 to Ethereum 2.0 will begin on December 1st (today) with the beacon chain, which will ensure that the main blockchain remains relatively untouched during the upgrade process. Because last week Ethereum exceeded an important threshold when the required number of 524,288 ETH, which was actually exceeded, was available for the initiation of the Ethereum 2.0 update. Ethereum 2.0 is highly anticipated and will be a major upgrade to improve the scalability and security features of the network. Part of the upgrade will change how Ethereum mining works and move the network from proof-of-work consensus to proof-of-stake. What does that mean?

The proof-of-work model is based on a computer network solving increasingly difficult algorithms for validating transactions and adding blocks to the blockchain. This energy-intensive process is the basis of most cryptocurrencies today. Especially those who use a proof-of-work consensus. However, proof-of-stake means that the validators can use their Ethereum to confirm transactions. As soon as a block has received enough validations, it can be added to the blockchain. Validators then receive block rewards ("rewards") for successful blocks, which could amount to up to 20% of the validator's share. In short, this means that the network will be far more energy efficient and more people will be able to be involved in the mining process. It is said that this is a great way to promote a more decentralized way to confirm transactions. In addition, the 2.0 upgrade will switch Ethereum to shard chains, which can be used to create parallel blockchains at the same time. This alone increases the network capacity of Ethereum from 30 transactions per second to over 100,000 transactions per second.

During the upgrade process, the markets responded positively to this news. For the first time since 2018, Ethereum is above $500.