The future of blockchain: what difference will Ethereum 2.0 make?

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23 October 2020
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Ethereum 2.0 - IQeon

The launch of Ethereum 2.0 is perhaps one of the most announced events in the crypto community. It has been postponed more than once, but users continue to hope for an upcoming update, because they believe in the potential of the new protocol. But what exactly will change with the roll out of Ethereum 2.0? Today IQeon will try to answer this question.

What is Ethereum 2.0?

Ethereum 2.0 is a new version of Ethereum blockchain, based on the Proof-of-Stake algorithm, which will enable tens of thousands of transactions per second.

According to the ambitious plans of the project founder Vitalik Buterin, with the advent of Ethereum 2.0, mining will become a thing of the past, and the emphasis on the new network will shift to staking – here PoS comes into force. Verification of transactions in the blockchain will no longer depend on the computing power – they will be verified by validators.

Yuriy Navadvorski, IQeon CTO, says:

Now we see that Ethereum network can’t deal with the load and meet all user needs. The transition to the PoS algorithm and blockchain sharding will significantly speed up the work of Ethereum.

What is staking?

As we said above, validators make the basis of staking. To participate in the creation of a new block, they need to make a kind of a pawn – at least 32 ETH, which are placed in a depository agreement and form a pool. In case of fraud on the part of the validator, the deposit may be completely lost – this will ensure the security of the network.

Unlike the Proof-of-Work algorithm, people don’t need huge computing power to participate in block formation. A laptop or tablet will be enough.

Yuriy Navadvorski also commented on this:

Validators, like miners, will receive rewards for their activities. It is not yet clear how much money can be earned on staking and what payout matrix will be implemented, but there are calculators that determine approximate payouts depending on network settings.

Although the specific payments have not yet been determined, Vitalik Buterin suggested that the income could range from 1.5 to 18%, depending on how much the stakeholder has invested.

Super fast transactions and scalability

Another important advantage of Ethereum 2.0 is the scalability mechanism, or sharding, which will take blockchain throughput to new heights.

At the moment, Ethereum network has only one blockchain. This certainly makes it secure, but it requires each server to validate transactions separately. That is why the speed of processing operations slows down significantly, especially when there are a lot of users on the network and they are all active.

Within the framework of sharding, the blockchain is divided into shards – block chains that allow processing operations with ETH by an independent set of nodes in parallel, rather than sequentially. The more shards there are, the better the network throughput is.

Minimum fees and advanced smart contracts

It is expected that new, more efficient smart contracts and decentralized applications will appear in the fully functioning Ethereum 2.0 network. So, in the final phase of the deployment, eWasm will be launched – a virtual machine for the execution of smart contracts, which will significantly reduce fees and make smart algorithms more functional.

New blockchain, old coin

A lot of people want to know if the new ETH 2.0 coin will emerge and how much it will cost. However, the developers of the project assure: a large-scale update will not lead to the emergence of a separate asset, and the existing ETH will be transferred to the new blockchain.

Analysts also warn that due to staking, a large number of ETH will initially be blocked. It is supposed to slightly reduce the supply of the coin and trigger the value growth.

When will Ethereum 2.0 be rolled out?

Perhaps this is the most popular question among the members of the crypto community. The zero phase of Ethereum 2.0 was supposed to be launched back in January 2020, but was postponed several times. Commonly developers made last-minute changes to the network technical design and ran final tests over and over again. It is known that the launch of the Spadina test network, the final one before the release of the zero phase of Ethereum 2.0, took place on September 29.

It is not yet known when the full version of Ethereum 2.0 will be released. Vitalik Buterin, the founder of the project, is confident that this will happen at the end of 2020, but the developer community is not so optimistic about such a time frame. Given the market capitalization of ETH and the number of people who rely on its infrastructure, it is important to brush up on functionality and bring it to perfection.

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A complete transition to 2.0 version is unlikely to be smooth – failures and technical slip-ups are inevitable at the beginning. However, creating an improved and competitive blockchain will undoubtedly solve the problems of scalability and very high fees. This will allow Ethereum to maintain the versatility of the project and, of course, leadership in the cryptocurrency market.

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