Cryptocurrency consumes a significant amount of energy. Or at least not as much as people worry about.
Open-source blockchain Ethereum had already announced intentions for a technological overhaul that would reduce energy use by as much as 99%, and Vitalik Buterin expects Ethereum 2.0 to be in place by the end of 2021. This will suddenly transform Ether, the native cryptocurrency, into one of the most environmentally friendly crypto compared with rival crypto coins including Bitcoin. This move comes at a time when the crypto space is dealing with volatility.
Ethereum 2.0, also known as Serenity or ETH 2, is an upgrade to Ethereum on a number of levels. Its primary objective is to increase Ethereum's capacity for transactions, reduce fees and make the network more sustainable.
The change in systems is expected to reduce the costs of buying and running powerful computing systems. The Ethereum 2.0 upgrade has been broken into three stages The Beacon Chain, The Merge and third stage to introduce sharding.
1. Beacon Chain
The first stage is already live and involves staking of ETH to enable a validator software.
- The beacon chain doesn't change anything about the Ethereum we use today.
- It will coordinate the network.
- It introduces proof-of-stake to the Ethereum ecosystem.
- You might know this as "Phase 0" on technical roadmaps.
2. Merge
The second stage will involve the migration of current system to the new system. It is expected to be over by the end of this year, 2021.
- Eventually the current Ethereum mainnet will "merge" with the beacon chain proof-of-stake system.
- This will mark the end of proof-of-work for Ethereum, and the full transition to proof-of-stake.
- This is planned to precede the roll out of shard chains.
- We formerly referred to this as "the docking."
3. Sharding
The third stage will introduce the process of sharding which will divide the database horizontally and spread it across to reduce network load. It is expected to start next year, 2022. “With shard chains, validators only need to store/run data for the shard they’re validating, not the entire network ”
- Sharding is a multi-phase upgrade to improve Ethereum’s scalability and capacity.
- Shard chains spread the network's load across 64 new chains.
- They make it easier to run a node by keeping hardware requirements low.
- This upgrade is planned to follow the merge of mainnet with the Beacon Chain.
The vision
To bring Ethereum into the mainstream and serve all of humanity, we have to make Ethereum more scalable, secure, and sustainable.
The need for Eth2 upgrades
The Ethereum protocol that launched in 2015 has had incredible success. But the Ethereum community always expected that a few key upgrades would be necessary to unlock Ethereum's full potential.
High demand is driving up transaction fees that make Ethereum expensive for the average user. The disk space needed to run an Ethereum client is growing at a fast rate. And the underlying proof-of-work consensus algorithm that keeps Ethereum secure and decentralized has a big environmental impact.
Today's Problems
The growing popularity of cryptocurrencies has put them under spotlight for the environmental concerns around them. Iran decided to ban mining because of the large-scale power outages in the capital Tehran and other areas that occur every day.
The challenge of decentralized scaling
A naive way to solve Ethereum's problems would be to make it more centralized. But decentralization is too important. It’s decentralization that gives Ethereum censorship resistance, openness, data privacy and near-unbreakable security.
Ethereum’s vision is to be more scalable and secure, but also to remain decentralized. Achieving these 3 qualities is a problem known as the scalability trilemma.
The Eth2 upgrades aim to solve the trilemma but there are significant challenges.
Secure and decentralized
Secure and decentralized blockchain networks require every node to verify every transaction processed by the chain. This amount of work limits the number of transactions that can happen at any one given time. Decentralized and secure reflects the Ethereum chain today.
Eth2 upgrades and decentralized scaling
The Eth2 upgrades will make Ethereum scalable, secure, and decentralized. Sharding will make Ethereum more scalable by increasing transactions per second while decreasing the power needed to run a node and validate the chain. The beacon chain will make Ethereum secure by co-ordinating validators across shards. And staking will lower the barrier to participation, creating a larger – more decentralized – network.
Scalable and secure
Increasing the size and power of Ethereum’s nodes could increase transactions per second in a secure way, but the hardware requirement would restrict who could do it – this threatens decentralization. It's hoped that sharding and proof-of-stake will allow Ethereum to scale by increasing the amount of nodes, not node size.
Decentralized and scalable
Decentralized networks work by sending information about transactions across nodes – the whole network needs to know about any state change. Scaling transactions per second across a decentralized network poses security risks because the more transactions, the longer the delay, the higher the probability of attack while information is in flight.
