Ethereum 2.0 Intro. The Ethereum community has long been…
Tags: Ethere, Eth2, Yeet, Eth

The Ethereum community has long been jumping from narrative to narrative since the inception of the network back in 2014, from sound money, to crypto kitties, and now onto an explosive DeFi space. Through all of this change in the use case, one thing has stayed consistent throughout the discovery of greater utility; the future of upgradability lying within ETH 2.0.

Current

The first signs of the shift to Ethereum 2.0 have started to show in the recent month, yet for the previous 6 years since the beginning, the network ran on the tried and true proof of work algorithm. This is the same concept as Bitcoin, where miners validate transactions and mine blocks for an Ether subsidy. This is all well and good, however, the narrative of Ethereum is changing and it looks like it is going to a place where huge amounts of transactions per second are needed to support the protocols on the network, and this is something that proof of work is not great at. The Bitcoin narrative supports proof of work because it acts as a store of value, not a transactional network, so a smaller number of transactions occur on the blockchain, whereas Ethereum needs to scale past the measly number of 10–20 transactions per second that it currently sits at. This is where ETH 2.0 comes into play.

What ETH 2.0 Does

ETH 2.0, in large, is a move away from proof of work, the well known and renowned system of blockchain security and coin issuance, to a system called proof of stake. This is a shift from crypto “miners” on the network to something called a validator. A validator can be any person who holds 32 ETH and sends them to the ETH 2.0 smart contract, activating validator software. Each time you send 32 ETH to this contract, a single validator is created. These validators do just that, validate and confirm transactions, store data, and add/organize new blocks on the Ethereum blockchain.

Why it is important

Decentralization

This process of network security is uniquely different from proof of work because of the increased decentralization. The current world of proof of work (the old system) is controlled by huge mining pools with lots of capital behind them to upgrade equipment, pay for electricity and stay ahead of the technology curve. A great example of this is the fact that Chinese Bitcoin mining pools control about 60 percent of the network’s hash rate (mining power). In Ethereum, only 3 mining pools controlled over 51 percent of the network mining power while operating on proof of work. This change to proof of stake (the new system) on Ethereum is actively increasing decentralization as it only takes 32 ETH to get started and you don’t have to buy anywhere near the amount of equipment you’d need in the old system. In the past month, the Ethereum validator count has shot up to over 36,000, many multiples more than the number of single validators (miners) that Bitcoin has, and data shows that there are huge numbers of different addresses providing the 32 ETH for staking, showing participation from many different parties.

2. Scaling

This network upgrade is increasingly important because the TPS (transactions per second) will increase by hundreds of times and significantly decrease the cost of transactions on the blockchain. A huge part of this scalability upgrade is sharding. Now this is where this gets a bit more complicated, but sharding is essentially where the Ethereum blockchain will get sharded into 64 separate chains that are interoperable with each other. This allows for far greater scalability of the network because it allows for the network to settle 64 blocks at once as opposed to one block. With an average of 70 transactions in one block, and one block taking 10–18 seconds, this is a giant boost to throughput.

Outlook on ETH, the asset