What is ETH 2.0?

ETH 2.0 refers to the last of the four stages of ETH development, which are: Frontier, Homestead, Metropolis and Serenity. The first three stages are under ETH 1.0, while in the fourth stage, ETH 1.0 will be upgraded to ETH 2.0, in which the PoW (Proof of Work) consensus mechanism will be upgraded to the PoS (Proof of Stake) consensus mechanism.

Why the need to upgrade to ETH 2.0?

1. Improve scalability

ETH1.0 only supports about 15 trades per second. During the upgrade to ETH2.0, there will be 64 (possibly more in the future) segments, which in theory will allow the network to be able to complete thousands or even tens of thousands of trades per second. With this, ETH2.0 will be able to solve the problem of an overly centralized computing power in the main network, and further improve the scalability.

2. Environmental sustainability

Currently, ETH is still using the mainstream PoW (Proof of Work) consensus mechanism to run and maintain cybersecurity. Although the PoW model has certain advantages in ensuring security and its degree of decentralization, the nodes for maintaining cybersecurity are still expensive. Only one node will find the correct hash value and obtain the accounting rights and rewards in the end. However, all the other participating nodes in the world would have consumed a lot of computing power. This model is not only inefficient, but also a waste of environmental resources. Once upgraded to the PoS (Proof of Stake) consensus mechanism, ETH will no longer rely on large amounts of computing power and electricity to maintain and operate the network, and instead rely on the method of staking coins to create blocks and deals on the chain.

Development roadmap of ETH2.0

Like ETH1.0, ETH2.0 will be divided into several phases. The most important are the first three phases: stage 0, stage 1 and stage 2.

Phase 0: Beacon chain

The Beacon chain will be introduced into the ETH2.0 network in phase 0. It is a brand-new blockchain that is in charge of managing validators participating in the stake system in order to run and maintain the network. It is the command and control center of the ETH 2.0 ecosystem.

In this phase, the ETH 2.0 network does not support smart contracts, asset transfers and other functions, and only supports the operation of verification procedures, so users will not be able to transfer their assets to the exchange during this phase.

Phase 1: Shard

The main goal of phase 1 is to integrate the shard chain. In this phase, ETH1.0 and ETH2.0 will be merged. The shard chain is an expansion mechanism of the ETH network, i.e., the ETH blockchain will be divided into 64 different chains, with the data processing tasks assigned to many nodes, as to be processed in parallel. Each shard chain is like a diversion lane of the main road in the ETH network, this significantly improves the network processing capacity and brings higher throughput. View the shard roadmap.

Phase 2: Execution

At present, the definition and function of phase 2 are still under review, what is known currently is as follows: The functionality of the shard chains will be fully improved in phase 2, and each shard will manage a virtual machine (EVM) based on eWASM (ETH WASM). They will be compatible with smart contracts, and support transfers, cash withdrawal, inter-shard transfers and other functions. In this phase, ETH1.0 will also finalize its merger with ETH2.0, and completely end the usage of the PoW (Proof of Work) consensus mechanism.

Image source: https://eth2.ethereum.cn/

eWASM (ETH WASM) is ETH2.0’s solution to the bottleneck problem caused by the Ethereum virtual machine (EVM). The EVM is responsible for the internal state of the ETH network and all its calculations. It has a significant impact on the task execution speed and the availability of the whole network. eWASM is an open standard designed by the W3C community group, and developed by top engineers from companies such as Google, Microsoft and Apple. It supports traditional programming languages such as C/C++ and 64-bit data processing, which can improve the network processing speed and throughput, as well as enhance security and availability.

How to become an ETH 2.0 validator?

The user first needs to stake 32 ETH to the deposit contract https://etherscan.io/address/0x00000000219ab540356cBB839Cbe05303d7705Fa#tokentxns, and then run ETH1.0 and ETH2.0 clients at the same time to become a validator. After becoming a validator, the node is required to run online for long periods of time. Every successful validation of a block will give out an ETH reward, with an annual yield of stake interest at about 5-10%. However, if the validation was missed due to being offline, the task assigned by the ETH network through the beacon chain will be fined, and the 32 ETH will be forfeited for malicious validation.

ETH staked to the deposit contract is an irreversible deal. Before transfers can be made, a two- or three-year waiting period may be required for ETH2.0 to reach phase 1 and be truly able to realize shards and smart contracts. This means that the validator will have to bear the risk of not being able to withdraw for at least 2 years. Moreover, once the ETH is staked to the beacon chain, BETH will be generated, and will not be able to return to the primary chain of ETH1.0. This also means that if ETH2.0 fails in the upgrading process, the user may suffer asset losses. Therefore, it is not recommended for general users to become validators.