Ethereum 2.0 is on its way. The upgrade to the decentralised blockchain-based computing platform was initially slated for a 2019 release with the first phase launched on 1 December 2020. The first phase, known as Beacon Chain, introduced the staking concept to Ethereum but cannot be used until other parts of the transition go live. In recent news, developers Tim Beiko and James Hancock announced a June 2022 release date for Eth2. This is when the transition from proof-of-work (PoW) algorithms towards a proof-of-stake (PoS) model is set to be complete.
But there are still two phases to go until the full-scale rollout. The sceptics are saying that Eth2 will not attract wider mainstream adoption and that the upgrade does little to solve the poor user experience (UX) design problems currently impacting the platform.
More importantly, PoS is intended to reduce mining cost and energy consumption, though network throughput will only increase if block times are reduced and/or block sizes are increased.
Let’s not forget, too, that the upgrade has been in the works for years.
However, with Ethereum 1.0, the network can only support around 15-45 transactions per second (TPS), which causes delays and congestion. Comparatively, PoS allows for faster transactions and could boost network speeds to 100,000 TPS, once Eth2 launches in 2022.
Ethereum’s current state
The global, open-source blockchain platform for decentralised applications (dApps) is in its fourth stage of development.
Ethereum was first outlined as a proof-of-concept whitepaper published by Vitalik Buterin in 2013 before the project’s launch in 2015. He wanted to expand upon Bitcoin’s primary function by building a protocol on top of it. Rather than a digital currency or commodity, Ethereum aims to be a global computing platform where smart contracts are programmed for a specific and recurring use.
Total transaction volume increased 2,000% year-over-year on the Ethereum blockchain: $777.1 billion in Q2 2020, compared to $36.7 billion by Q2 2021, with 3000 active dApps and 150 million unique Ethereum addresses. This growth in dApp usage has been driven by the rapid rise of decentralised finance, or DeFi.
Ethereum still faces lingering gas fee parameter issues and massive limitations in terms of scalability. Transactions also have long confirmation times that typically result in delays and asynchronous transaction submission notices.
This is where Eth2 comes in.
What to expect from the next two phases of implementation
Ethereum’s history has been one of consistent improvements and upgrades to the core protocol. We first heard about Eth2 in Buterin’s 2018 Devcon speech. Eth2’s gradual approach, with its multiple stages, each initially estimated to be one year apart from each other, is guided by five design principles: simplicity, resilience, longevity, security and decentralisation.
Buzzwords aside, what have we seen in terms of real changes and what’s to come next? Over the past five years, there has been several smaller upgrades improving Ethereum’s usability and scalability. But Eth2 is by far the most ambitious and radical change to be implemented on the network. No wonder that it requires several years to fully implement.
Eth2 will create a much more sustainable network without the energy-intensive mining and introduce smart contracts to the broader world, increasing Ethereum’s real-world utility. It’ll be much more scalable and efficient while retaining or even improving its security and decentralisation.
Sharding is the scaling solution chosen by the Ethereum community as the best option to achieve increased scalability by removing the need for every node to verify every transaction. According to the most recent project specifications, Eth2 will split the network into 64 shards, with each shard being able to handle as much traffic as the current Ethereum network.
However, sharding only helps applications that can run independently from one another and only need to be synced every once in a while. But DeFi’s inherent decentralised and open-sourced nature means that the sharding-style processing would need to run transactions through a relay chain and this could slow down the entire process. Will sharding vastly improve scalability and throughput? We’ll have to wait and see when Eth2 is fully rolled out.
Finally, Buterin has said that new-token issuance will be greatly reduced under Eth2, which could increase demand.
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