Everything you need to know about ETH 2.0

Greetings

In 2015, Vitalik Buterin introduced an altcoin that changed the crypto sphere: ETHEREUM.
It stands as the second most popular digital asset in the world with a unique blockchain technology that can be used to develop
smart contracts and decentralized applications.

Now five years later, Ethereum is updated, more improved and adaptable than ever.

So what exactly is this latest update?

Project Serenity: What is Ethereum 2.0?

Also called ETH2 or ‘Serenity’, Ethereum 2.0 is the latest implementation of a new technology to the current network. To ensure that
every step of this upgrade is tested and effective, it will be initiated in different phases over the next few years. The aim of this blockchain
project is to improve the current Ethereum 1.0 network, which is not scalable and efficient enough to handle huge blocks of transactions.

The first part of this project is the ‘Phase 0’, which is the layering of the current Ethereum network on a new platform called the ‘Beacon chain’.
This program will be connected to Ethereum 1.0 so all the transactions within it will run parallel to the new network.

Aside from the Beacon chain, a new way of consensus will also be implemented in Ethereum 2.0. Instead of the ‘proof of work’ mechanism,
ETH2 will now use ‘proof of stake’ to approve its transactions.

Proof-of-work vs proof-of-stake

To get transactions processed, cryptocurrencies rely on two types of consensus mechanisms: proof of work and proof of stake.
Since the blockchain doesn’t have third-party intermediaries, these two models validate the exchanges, allowing users to send and receive funds.

The proof-of-work protocol (PoW) is popularly known as ‘mining’. Currently, this consensus mechanism is how Bitcoin and Ethereum 1.0
handles transactions within the blockchain. In this process, a form of mathematical equation called ‘cryptography’ is solved in order to
execute a transaction.

However, this process takes a lot of mining effort for validators and their computers to untangle this intricate set of codes, which makes it
impossible to increase the load of transactions being processed in a short period of time. Not only does this cost time and electricity,
but the burden can fall on users who have to pay expensive fees.

Additionally, PoW is prone to centralization since only a few organizations can afford to buy ASICs, which are devices that can speed up
the process of mining digital assets.

Meanwhile, proof-of-stake (PoS) is currently becoming the latest protocol for cryptocurrencies. The idea behind PoS is for validators to
‘lock-up’ tokens in the blockchain to process transactions.

Once a user becomes a validator, they can approve transactions by signing off on them. If the transaction gets through the blockchain,
validators can receive incentives that are the same amount as their stake.

Ethereum 2.0: The Casper Protocol

Along with the Beacon chain, the Casper Protocol is another feature included in phase 0 of the ETH2. As said before, the new upgrade of
Ethereum eliminates mining and utilises the proof-of-stake protocol instead for more efficiency. This new consensus has two types:
Casper the Friendly Finality (FFG) and the Casper the Friendly Ghost: Correct by Construction (CBC).

The former will ensure that all the programs within the chain run smoothly without lagging. When new blocks are created through mining,
the FFG will be layered on top through the use of smart contracts.

On the other hand, the latter will ensure that everything runs parallel within the Beacon chain and is in-sync with the old network until the
PoS can stand on its own.

The Casper Protocol functions as a PoS mechanism where validators need to ‘stake’ their own ETH coins to become a part of the network.
Additionally, their voting power in the chain is determined by the number of stakes they have. To process a transaction, a validator must
sign off at least 32 ether coins. This means that if a person staked at least 64 ether, they have more than enough to initiate a transaction.

Advantages of staking

* It’s environment-friendly

Unlike mining, proof-of-stake doesn’t use huge amounts of energy and effort just to execute transactions. This creates a more sustainable
process that can benefit the users and the environment. In PoW, miners use a device called ASICs that need to run on large energy consumption
to solve the algorithm in the blockchain. Meanwhile, PoS only relies on regular computers to process transactions.

* It’s more decentralized compared to PoW

When it comes to a ‘decentralized’ consensus mechanism, the PoS creates a more decentralized ecosystem for every validator present in the
chain than PoW. This is because it eliminates mining, where ASICs can be used to speed up the process of transactions. The problem in ASICs is that
it can potentially create centralized mining in the chain because only a few people can afford to buy this high powered device.
People who cannot buy ASICs will be left on the disadvantaged side of the mining pool.

* It has a ‘slashing’ feature

On top of the rewards concept of the Casper, it also has a ‘slashing’ feature that serves as a form of punishment for validators who misbehave.
The gravity of the punishment depends on the situation. Essentially, ‘slashing’ means that a part of the validator’s stake will be removed
from the network. This enforces discipline among validators who want to do unscrupulous acts in the chain.

* It’s safer than PoW

When it comes to safety, the PoS is more secure than the PoW because the validators are selected randomly by an algorithm.
This means that coordinated attacks within the chain are impossible because the validators cannot choose to ‘vote’ when it’s not their turn.
Additionally, if ever someone tries to breach the chain, they would need to convince the majority of validators within the network. However,
with the possibility of 32 ETH getting slashed from their accounts, it’s impossible to initiate an attack in the system.

* It’s more scalable

The ETH2 features a concept called ‘sharding’ which means that the entire Ethereum network will be split or ‘sharded’ into different sections.
These ‘shards’ stand as an individual blockchain linked to the Beacon chain. Within these shards, different transactions are processed,
creating a more seamless flow of information and accounts within the network.

Disadvantage of Staking

* It can also lead to centralization when not checked

While it’s impossible to hoard all the transactions in the chain, validators with more stakes can execute rules on the network such as
cancelling transactions and creating new guidelines. While this won’t generate any profits, it’s still likely to happen and create disadvantages
for users and other stakeholders.

PoS vs PoW: Which one is better?

There have been a lot of debates about the functionality of both mechanisms over the years. However, the nature of each protocol’s issues
come from different perspectives, depending on what aspect of the consensus is being discussed.

Both protocols have their own pros and cons. When it comes to the Ethereum update, the world has yet to see what changes the proof-of-stake
can implement. At the moment, people in the crypto sphere will have to wait to see if these changes will live up to Ethereum’s promise.

Ethereum 2.0 is still on its infant phase, meaning it’s too early to say whether this update is for the better. Only time will tell if the changes
applied can deliver the decentralized promise of Vitalik Buterin. In the meantime, it's an indisputable fact that Ethereum is an altcoin that
can help revolutionize the finance industry and welcome the age of digital assets in the future.

What do you think about the future of ETH?

Your comments and thoughts are much appreciated.

Thanks,
Karl
Bitcasino.io

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