The Crypto community was waiting for the Ethereum network upgrade to its second version. The launch of Ethereum 2.0 (also called “Serenity”) finally happened on December 1, 2020 (it was postponed a couple of times). Some people, for example, Ryan Watkins (researcher of Messari company), stated that Ethereum 2.0 was a greater catalyst than BTC halving.
So what does this update mean and why was it one of the most awaited events at the timeline of Crypto history? Let’s figure it out.
What is ETH 2.0?
ETH 2.0 is a large-scale update of the basic blockchain network, during which the transition from Proof-of-Work to Proof-of-Stake will be implemented. The PoS consensus algorithm should replace the outdated PoW that has its problems, and developers are moving the platform to a progressively modern algorithm to improve it. There are several reasons for this:
- Proof-of-Work is economically inefficient and consumes a huge amount of electricity;
- Less investment in mining as there is no need to invest in expensive equipment;
- Opportunities for network scaling and transaction speed increase;
- PoS is far more environmentally friendly than classic mining;
- Proof-of-Stake encourages investors to hold crypto.
Ethereum 2.0 roadmap
According to the Ethereum 2.0 roadmap, at least three main stages will be implemented, after which the network will function in full:
Phase 0 is already launched. During this stage, the Beacon Chain is being tested and the validator mechanisms are being debugged. Specifically this phase started on December 1, 2020.
*Beacon Chain is the main component of the Ethereum 2.0 process. With the help of this blockchain, the ETH network moves to the PoS consensus algorithm.
Phase 1 release is planned to be out in 2021. At this stage it is planned to integrate sharding, which is aimed to improve network scalability. Thus, the network will be divided into 64 separate blockchains, due to which the bandwidth will increase proportionally.
* Sharing is a scalability mechanism that will improve the bandwidth of the blockchain.
Phase 1.5. During this phase Ethereum 1.0 will merge with Ethereum 2.0. After this phase, the Ethereum 1.0 chain will become a shard of the Ethereum 2.0 PoS blockchain.
Phase 2 is planned to be launched in 2021 or 2022. Within this phase, transfers, accounts, coin withdrawals, etc. will be added. More information may be found on Ethereum.org.
Vitalik Buterin has also posted a tweet with his vision of the ETH 2.0 development:
How did the launch go?
As you already know, the launch of Phase 0 happened on December 1 as it was planned. The required balance threshold of the deposit contract of 524,288 ETH and 16,384 validators in the network was exceeded a week earlier. In the first days after the launch, users have already contributed over 1 million ETH to the deposit contract, and the number of active validators has beat 23,000.
On the second day, one of the network validators lost part of the stake for block distortion. The validator was fined 0.25 ETH.
The first block (genesis-block) was followed by the message “Mr F was here” and made the community members curious about this mysterious person.
The fourth block included the message “Welcome to a New Beginning”.
After the event, some crypto wallets started to open access for ETH 2.0 staking, i.e. MyEtherWallet has opened access to ETH 2.0 staking through the Staked service.
Also the Binance crypto exchange platform announced the launch of Ethereum 2.0 staking. The service is available from December 2.
Staking support was also reported by Coinbase and Huobi exchange platforms. KuCoin exchange not only launched a staking service, but also announced the opening of trading on ETH2 paired with ETH. It can be expected that over time, the new token staking service will appear on most major cryptocurrency exchanges.
Ethereum rate has grown significantly shortly before the launch of Phase 0, however, immediately after the release of the genesis block, the cryptocurrency almost instantly fell by 8% – from the moment when people could buy it for $615 to $574 (according to the data from Coinmarketcap.com).
Ethereum 2.0 has been highly anticipated and widely discussed by blockchain fans. Proof-of-Stake and sharding should dramatically improve scalability, security, and availability. For ETH holders, Ethereum 2.0 provides a new opportunity to participate and receive rewards for maintaining the network.