What is ETH 2.0 and What is Happening in Phase 0?
By: Huobi Global
Tags: Huobi, Ethereum 2, Ethereum, Proof Of Stake, Buyeth

When it comes to the cryptocurrency space, there are arguably no blockchain projects more important than Ethereum. The second-largest cryptocurrency by market cap was also the mother of ‘Generation 2’ for blockchain’s as it introduced smart contracts and the notion of a ‘World Computer.’

The potential and possibility that Ethereum introduced to the technology have since been taken up by a number of other projects and platforms, but Ethereum still remains an integral part of the evolution of blockchain. Thus, when it was announced that Ethereum 2.0 would be coming, a lot of people took note.

Now, Ethereum 2.0 is launched, and this all begins with ETH2.0 Phase 0 Beacon Chain, set for completion next year. This will kick off the major upgrade for Ethereum in order for it to attempt to reach its goal of being a ‘World Computer.’

Those who have followed Ethereum since its creation would have seen how far it has come, but also picked up on the numerous shortfalls — including its scalability and the speed of its development. The hope is in Ethereum 2.0, via three important upgrades (The Casper Consensus, Sharding and eWASM Virtual Machine) this programmable blockchain will once again burst forward into the next evolution of blockchain technology.

🔹What is Ethereum 2.0 — and why?

As with any technology, the prefix ‘2.0’ hints at a major upgrade to the previous version — and this is exactly what Ethereum 2.0 is. The blockchain has been created, realised the path of its potential, but not been able to reach that in its current form calling for major upgrades in its next step.

But, ETH 2.0 is regarded as building a new generation of Ethereum blockchain more than just upgrading the existing network. The important goal of ETH 2.0 is to complete the transformation of the consensus mechanism of the main network from Proof Of Work to Proof Of Stake; greatly improve the performance of the blockchain network with sharding technology, and improve the execution speed of the smart contract by advanced virtual machines.

The biggest change is clearly the change in consensus mechanism, but this is not a decision that has been taken lightly or quickly as the co-founder of Ethereum, Vitalik Buterin, began to study the switch of Ethereum to PoS network in 2015, and officially proposed the 2.0 plan in the speech of Devcon 4 conference in 2018.

Already we have seen important hard fork phases such as Frontier, Homestead, Metropolis Byzantium, and Metropolis Constantinople to prepare for the final Serenity PoS network upgrade.

But why change from PoW — the same consensus mechanism that Bitcoin uses — to PoS? To begin, Ethereum’s Ethash PoW mining algorithm ensured the authority and non-tamperability of block data, but it also sacrificed the transaction throughput and scalability of the network. Any transaction requires all nodes to spend computing resources to hash, which is the ‘common fault’ of all blockchain projects with PoW as the consensus mechanism.

The current transaction processing speed of the Ethereum main chain is still between 15–20 tps, while most competitors have given up the PoW mechanism allowing them to surpass Ethereum in terms of performance.

For Ethereum to realize its goal of being the ‘World Computer’ there is just no way it can go on with 15–20 tps and this is why the change to The Casper Consensus has become necessary.

The other big changes that will go along with this consensus change include the use of sharding to also help with scaling and performance, as well as the new virtual machine eWASM. Many believe that eWASM will help create an ecosystem that’s fast, scalable, and flexible, encouraging developers to build complex smart contracts on top of Ethereum 2.0.

🔹A long way to go

So it is clear that Ethereum 2.0 is a major upgrade to the network, in fact, more of an evolution. We have also understood the need for the changes that are going to be implemented. It has also alluded that this is not an overnight process, and the completion of Ethereum 2.0 will not be rapid either. There is a lot of work that needs to happen to make this new implementation happen.

For starters, Ethereum 1.0 is a single main chain that processes all transaction information of the network. All nodes participating in the network process the transactions in order (including the transactions in the smart contract). The processing order is completely packaged in blocks and then serially processed. The final node reaches a consensus but the process efficiency is low.

However, starting from ETH 2.0, Ethereum will establish a three-layer network structure, as shown below, including the existing PoW Main Chain, Beacon Chain, and Sharding Chain. It will also incorporate a new cryptocurrency, called BETH that will have to coexist with ETH for some time.

This is why Ethereum 2.0 is taking this process in phases, and it starts with Phase 0. Phase 0 is the first phase of the Ethereum 2.0 launch. This will release the proof-of-stake network, which will come online this year. This will see ETH 2.0 begin as an independent PoS network with the additional phases: sharding, eWASM, and the direction of subsequent continuous innovation, still being dynamically formulated.

Beacon Chain will be launched in Serenity Phase 0. The Beacon Chain is the one that will be based on PoS. At this stage, the Beacon Chain PoS anchors the current PoW main chain, registers the verifier management contract on the main chain, manages the security deposit pledge of the verification node, verification node addition, and election. The main work of the Beacon Chain network stage is to launch Casper PoS consensus.

At Phase 0, ETH2.0 is not equipped with sharding technology and smart contracts, so it does not support on-chain transfers.

🔹An ambitious approach

There is no getting away from the fact that Ethereum is looking to undertake an ambitious upgrade with Ethereum 2.0. It has been one in the works for some time and will continue to be worked upon for years to come. Technologically, it makes a lot of sense and looks to be pushing Ethereum in the direction to reach its goal, but only time will tell.

There have been some controversy, criticism, and issues already before Phase 0 has even been enacted with this upgrade, and there will continue to be major concerns along the way. However, blockchain technology is still very nascent and is still finding a way to ingrain itself into the next technological evolution, so Ethereum could help grease the rails towards this.

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