Smart contract expert, Joseph Chow, made a pretty interesting analogy while comparing Ethereum 1.0 and Ethereum 2.0. According to him, comparing ETH1 and ETH2 is the same as comparing a road and a highway due to the upgrades in overall scalability, throughput, and security. We have recently gone through the Berlin hardfork, and this coming July, Ethereum will finish the London hardfork – a significant milestone on the road to Ethereum 2.0.
Which brings us to the main topic of the day – What exactly is Ethereum 2.0? What are the changes that ETH 2.0 is going to bring into the original Ethereum protocol?
Well, let’s take a look.
As you may already know, the Ethereum network is looking to transition from proof-of-work (PoW) to proof-of-stake (PoS).
So, why are they doing this in the first place? Turns out that while PoW is proven and highly secure, it faces two major problems:
Problem #1: Barriers-to-Entry
As things stand, the barriers to entry for mining are incredibly high. Not only is the mining hardware costly, but the cost of mining itself is entirely off the scale. Plus, to offset the production costs, the miner needs to relocate to an area that uses alternative energy sources and has an overall cold climate. This is the reason why Chinese miners have started migrating en-masse to the Sichuan province.
PoS has a lower barrier to entry than PoW. It’s much simpler for an average investor to buy Ethereum tokens and stake them in the staking pool rather than buy an entire mining infrastructure and pay bloated up electricity bills every month.
Problem #2: Lack of Scalability
Usually, each block in a blockchain is mined sequentially to prioritize security. Due to limited block size, Ethereum could process only a limited amount of data within the blocks. What this means is that during times of high congestion, the network slows down considerably. This is another problem that PoS can solve since sharding requires PoS from proper implementation (more on this later).
In PoS, validators (users selected to mine or validate block transactions) are chosen via various random selection and combinations of wealth or coin age. In this system, the mining system is completely virtual, and the individual node’s hashrate is directly proportional to their stake instead of individual computational power.
Ethereum’s implementation of PoS is known as the Casper protocol. A validator must lock up 32 ETH tokens. In this system, Ethereum’s validators are punished for sub-optimal or malicious behavior wherein they get punished for acting against the interests of the system. The punishment works as such:
This is a critical step because it essentially guarantees that the incentives of the validators are aligned with the overall Ethereum network.
Ethereum 2.0 will be improving overall network scalability by introducing “sharding.” Now, if you have worked with databases before, then you should be familiar with this term. Simply put, if you are dealing with a bulky database, you can horizontally partition it into smaller chunks or “shards.” Following that, you may process these shards parallelly and drastically reduce the processing time.
Wait, why “horizontally?” Why not vertically?
Well, let’s take an example.
Now, if we vertically partition this table, this is what we get.
As you can see, the resultant tables are completely different from the original table.
However, what if we do a horizontal partition?
Now, as you can see, these two tables are just smaller versions of the original table. In other words, these are the shards of the original database. This significantly reduces the amount of data that you are working with and makes traversal much simpler.
Blockchains can be thought of as highly sophisticated decentralized databases. Sharding breaks up the entire data verification process into smaller shards. Now, the whole network will be able to process all the tasks parallely and increase throughput significantly.
To better understand this, consider the following example.
Why Do We Prefer PoS For Sharding?
PoS implementation makes sharding a lot simpler. In a sharded PoW chain, a powerful miner can use their superior hash power to take control of an individual shard. This could lead to increased centralization.
Ethereum 2.0 will be launched over 4 phases – Phase 0, Phase 1, Phase 1.5, and Phase 2.
Alright, so now that you have read up on everything, here is how you can buy ETH and get into the wonderfully innovative world of the Ethereum ecosystem. Just make an account on CoinSmart and finish your KYC. After that, you can easily buy ETH with CAD or EUR. It really is that simple, check it out here.
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