Ethereum remains an innovative platform in the cryptocurrency space. The system’s pacesetting strides have certainly earned its investors remarkable returns. ETH has grown over 900% in the past 12 months — 600% more than Bitcoin in the same period! In addition, it has remained a major competitor to BTC and is the second most valuable cryptocurrency globally.
However, Ethereum has not been without its shortcomings that negatively influence this network. Consequently, Ethereum 2.0 is currently under creation to correct its issues, but is the upgrade necessary? Will it be worth it? What are the benefits of creating ETH 2.0 while Ethereum is so successful? Keep reading for answers to these pivotal questions.
Understanding the Foundation: What Is Ethereum?
Ethereum is an open-source resource for the development of decentralized applications. The platform is available worldwide and accessible to everyone: the goal is to establish a protocol that allows for permissionless application creation with globally accessible data and states. Smart contracts are one of Ethereum’s key tools; they allow all participants to automate the execution of their agreements and be certain of the outcome.
Transitioning From PoW to PoS
- Like most cryptocurrencies launched after 2012, Ethereum uses a similar consensus mechanism to Bitcoin — Proof-of-Work (PoW). This protocol has two major functions, which are to facilitate node incorporation to verify data published on the ETH platform and to foster Ethereum’s economic growth. PoW has played its roles to a significant extent, but there are imperfections that the network cannot ignore anymore.
- Key among these shortcomings are slow transaction speeds and relatively expensive gas fees. CryptoKitties — an ETH-based game — makes for a good example; this program was the first introduction of NFTs (non-fungible tokens) and gained incredible popularity shortly after its release. Unfortunately, this clogged the network, resulting in numerous transactional difficulties.
- DeFi’s (Decentralized Finance) emergence further emphasizes the relevance of a streamlined system. DeFi may have recorded excellent market growth since its introduction, but the PoW consensus leaves much to desire. Consequently, some investors have switched to other blockchains, while others remain spectators until the edges are ironed out. Ethereum’s boundaries may be limitless with more stable fees and better scalability.
- In comes Ethereum 2.0, an upgrade that became necessary to cover for ETH 1.0 boomerang flaws. Developers are targeting a more scalable network and a wider blockchain acceptance. Several changes are in the offing, notably the switch from PoW to PoS (Proof-of-Stake) consensus mechanisms. Staking assures more participants in the network, an improvement that may achieve perfect ETH decentralization.
Notable ETH Shortcomings: Why Do Crypto Users Need ETH 2.0?
Ethereum may be uniquely innovative and may have recorded incredible growth since its launch in 2015. However, there are a few concerns about the platform — some too significant to ignore. Let’s see what they are.
- A Clogged-Up System: Choked arteries considerably limit Ethereum’s aim to spread across the world. The platform may be present globally as it stands, but the population on the blockchain was unprecedented. Transactions may be slow and difficult due to the need to verify every transaction before completion.
- Insufficient Disk Space: The ever-growing ETH populace has also affected the smooth incorporation and running of nodes. These are special software that facilitate seamless operations across the platform.
- High Energy Consumption: Ethereum uses an unsustainable power source for the maintenance of network security for the Proof-of-Work consensus algorithm. This may threaten environmental health.
Ushering in a New Dawn: What Is ETH 2.0?
ETH 2.0 is an enhanced version of the Ethereum blockchain. This product redefines Ethereum’s goals, as establishing a global, open-source protocol isn’t enough anymore; the platform now targets faster speeds, better security, and more convenience.
Assessing ETH 2.0: What Promise Does It Hold?
With ETH developers back to the drawing board to launch an upgraded version, what may investors expect?
- Greater Scalability: The choking crowd on the Ethereum blockchain makes it imperative to build a system that may facilitate thousands of transactions per second (TPS). ETH 2.0 assures this need, resulting in cheaper fees and faster sprints.
- Improved Security: ETH 2.0 promises a highly secure platform that supersedes the security level currently at Ethereum. User institutions and other stakeholders are bound to feel safer and more comfortable with this development.
- Sustainable Energy: ETH 2.0 is programmed to run without any mining. This change invalidates the PoW consensus algorithm, which consumes excessive energy — thereby guaranteeing environmental sustainability.
Ethereum 2.0 Release Date: When Is the Future Reaching Us?
The Ethereum 2.0 release is scheduled as a three-phase arrangement.
Phase 0: Beacon Chain (2020)
The Beacon Chain’s primary function is to oversee the implementation of the Proof-of-Stake algorithm and pave the way for all its Shard Chains to follow in Phase 1.
Phase 1: Shard Chains (2022)
This phase splits the Ethereum blockchain into multiple phases, leading to a better capacity for storing data and processing transactions.
Phase 2: Execution Engine (2022 – 2023)
The Execution Engine will support contracts, accounts, stats, and other data that users, developers, and other stakeholders gain from the current smart contract languages.
Ethereum is an excellent platform for developers to write codes for creating decentralized applications. The system also offers smart contracts, which are unique Ethereum accounts that may conduct agreements as they are programmed.
However, all these benefits don’t excuse the platform of its issues. Transactions stumble from time to time, courtesy of the clogged-up network and the inability to run nodes seamlessly. It’s become clear that the blockchain requires an upgrade, and few investors would disagree with the necessity of ETH 2.0. Ethereum 2.0 promises and already appears to be a very effective project, but time will tell.