Ethereum 2.0 also known as Eth2 or “Serenity,” is a collective term for a set of upgrades that are currently underway on the Ethereum blockchain which will help to process more transactions per second, use less energy, and become more secure.

These upgrades will help to address scalability challenges, high gas fees (transaction fees), and congestion in Ethereum’s existing PoW blockchain.

Ethereum 2.0 is launching in several phases, with the first upgrade, called the Beacon Chain, having gone live on December 1, 2020. The Beacon Chain introduces native staking to the Ethereum blockchain, a key feature of the network’s shift to a PoS consensus mechanism. As the name suggests, it is a separate blockchain from the Ethereum mainnet.

The second phase, called The Merge, is expected in the first or second quarter of 2022 and will merge the Beacon Chain with the Ethereum mainnet.

The third phase is called as sharding, The blockchain will see its first divisions of processing, enabling parallel transaction validation for the first time.

PoW to PoS

Proof of Work, however, is not perfect, and the flaws which including slow transaction times and hefty gas fees and this became too big problem. The emergence of the Ethereum-based CryptoKitties game is one good example for that. The game, which introduced an early version of non-fungible tokens (NFTs), became so popular that it made the Ethereum network to clog, delaying transactions and causing fees to skyrocket.

The rise of decentralized finance, or DeFi, is yet another use case that has underscored the importance of an efficient network.

This is the main reason why Ethereum 2.0 comes in. In order for developers to avoid shooting themselves in the foot with their own innovation, they are building Ethereum 2.0. This is a massive upgrade of the existing network to one that is more scalable and could hasten the adoption of the blockchain among the mainstream.

In Ethereum 2.0, Chief among the changes is a switch in the consensus protocol from PoW to proof-of-stake (PoS). Staking will lead to greater participation in securing the Ethereum network, which in turn will create a more decentralized blockchain

In the PoS system, Nodes, or stake pools, are chosen which is based on the size of the “stake” it holds. In other words, the more coins a stake pool holds the more likely it is to be chosen to forge a block and get rewards. To ensure that the wealthiest pools do not always win, other criteria, like the amount of time coins have been staked, can factor into the selection process. Holders of the coin can “stake” their holdings to a stake pool and when a pool (node) is selected to forge a block the reward it receives is distributed among the individual stakers. 

Some PoS blockchains have added a degree of randomization into the process so that older and larger stakes do not always win. So, in PoS, miners are replaced with stake pools where people stake their coins. Individuals can “stake,” or place their coins with various stake pools, just the same as miners joining a mining pool to earn more rewards. 

PoS also improves Ethereum’s efficiency and ability to scale, In PoW all data that is added to the chain has to undergo verification by all participating nodes. That means that the processing speed of the entire system is limited by the speed of its slowest participant. It creates a haphazard that led to the increase in the transaction costs and decreases throughput.

With a mixup of Staking, Ethereum 2.0 can increase the efficiency of its resource usage in a big way. The new system will accomplish this by breaking data verification tasks up among sets of nodes and each will be responsible for verifying just the data it’s received. That allows the whole blockchain to make use of parallel processing, which could increase overall capacity several times over. Between this added technique and the switch to proof-of-stake, the new Ethereum blockchain should be far faster and more efficient than its predecessor.

Benefits of Ethereum 2.0

• Greater scalability: The most important advantage of Ethereum 2.0 is its scalability. With Ethereum 1.0, the network can only support around 30 transactions per second in turn this causes delays and congestion. Ethereum 2.0 promises up to100,000 transactions per second. This increase will be achieved through the implementation of shard chains.
• Greater security: Ethereum 2.0 has been devised with keeping security in mind. Most PoS networks have a small set of validators, which makes for a more centralized system and decreased network security. Ethereum 2.0 requires a minimum of 16,384 validators, making it much more decentralized – and thus, secure.
• Greater sustainability: A lesser carbon footprint has become a major theme in the cryptocurrency industry. The PoW consensus algorithm consumes a great deal of energy. Ethereum 2.0 will be better for the environment as there will be no more mining involved. According to Ethereum Co-Founder Vitalik Buterin, Ethereum’s energy consumption will be diminished “by a factor of more than 1,000” with PoS.

Phases of Ethereum 2.0:

Ethereum 2.0 comprises three separate upgrades, each of which holds its own importance.

• Beacon Chain: Launched in 2020, this technology introduced staking to the network and paved the way for future upgrades. While the Beacon Chain is in testing mode, it is live and will eventually be the cornerstone of Eth2.
• Merge: The Ethereum merge is expected for either late 2021 or sometime in 2022. This is where the Beacon Chain will be combined with Ethereum’s mainnet and it will make staking on the Ethereum blockchain a reality while marking an end to mining.
• Shard Chains: This represents the splitting of the Ethereum network, which will occur in phases will result in a greater capacity for processing transactions and storing data. Sharding chains are planned for 2022.

Final words:

Ethereum is one of the biggest crypto currencies standing second only to bitcoin. The transition to Ethereum is a wide series of events that happen in stages. As each stage happens, the developers intend to perform thorough tests to make sure that the system is both secure and stable. This helps the users time to adjust to the specifics of the new blockchain implementation.

If the stages go over without any issues the new Ethereum 2.0 will emerge from the process in a great position and will finally end Bitcoin’s long reign as the cryptocurrency king. It will be a trusted system with far fewer scalability issues and a much larger feature set than its primary competitors.

Its only the time that will answer the question?  if the launch of the upgrade will be the signal of a new blockchain era, but one sure thing is that a new day is dawning for Ethereum.