In today’s world, there’re no people who have never heard of or have no idea about the world of cryptocurrencies. Some people give their resources to be managed by specialists. Many want to keep everything under control on their own, get into the subject, develop and earn money. A lot of terms will be incomprehensible to a newcomer. Fortunately, with a little bit of time, you can figure out what Ethereum 2.0 is.
What you need to know about Ethereum 2.0
Blockchain technology has revolutionized global markets, changing many areas of activity. In areas such as commerce, finance, agriculture, and healthcare. The earliest and most widespread application of blockchain technology was Bitcoin. Since then, more than 9,000 other altcoins have grown out of it. Ethereum is also the second-largest blockchain by market capitalization and the largest general-purpose blockchain.
To compare and summarize, Bitcoin aims to become an inflation-proof medium that is easy and safe to manage. Ethereum was developed for smart contracts and decentralized apps – Dapps. Ethereum isn’t considered perfect but you can’t say it’s bad. The Ethereum Foundation has the ability to improve aspects such as performance and security, which it does in Ethereum 2.0.
Ethereum 2.0, also known as ETH 2.0 or Serenity, is a blockchain upgrade of the largest cryptocurrency after Bitcoin. The purpose of the upgrade is to improve the efficiency, speed, and scalability of the Ethereum chain so that the latter will be able to handle a much larger number of transactions per unit of time. To accomplish this, Ethereum will change its consensus mechanism from proof-of-work [PoW] to proof-of-stake [PoS].
What is a consensus mechanism and what do you need to know about it
Any company or organization usually has a database to function. This database stores information about users. The computers where all of this information is stored are usually located in one place. The management of which is the responsibility of the administrators. Blockchain is a type of database.
Only instead of storing all the information about one place, it’s broken down among many people, including places. In the event that one item fails, many others will support it. The point is for these people to find a way and negotiate. That they put in the right set of data so that all of their versions of the data match up.
That is, there needs to be some kind of mechanism to build that consensus. They’re actually different types of consensus mechanisms. They’re used to ensure that transaction data remains consistent among all the nodes in the system itself.
Why is the shift to proof-of-stake essential
Blockchain uses a proof-of-work mechanism, PoW for short. PoW requires computers to compete with each other to process transactions and receive rewards. The only problem is that this process takes a lot of time and effort. So another method was chosen – proof-of-stake, an acronym for PoS. As a result of upgrading Ethereum to version 2.0 and switching to PoS, transactions will run faster and with lower fees.
With PoS, the consensus is achieved by an algorithm that selects a node. The one that wins a block of transactions. When a node is selected, it forges the next block of transactions in the chain. In PoS, these nodes are commonly referred to as betting pools. Nodes, or betting pools, are chosen based on the size of the bet it holds. Thus, in PoS, miners are replaced by pools in which people bet on their coins.
At what stages will Ethereum 2.0 be realized
Phases of transition to Ethereum 2.0 are carried out in stages. The main task of Phase 0 was to launch a chain of beacons in the network. Also to lay the foundation for all subsequent phases. The main goal of Phase 1 was to implement a chain of shards and roll-ups.
Phase 1.5 is an intermediate stage between Phases 1 and 2. It should provide a bridge between Ethereum 1.0 and Ethereum 2.0. Phase 2 will give the network the ability to process smart contracts and transactions. This will officially turn every shard chain in the network into a full-fledged manner.
How the price of Ethereum will change
Of course, many have said that the price of Ethereum will rise behind the update. At least because Ethereum and its DeFi network will be simpler, that is, more practical. Exactly for regular people who don’t own a lot of money. Which will be followed by a decrease in transaction fees in Ethereum.
Those who will benefit the most from the Ethereum update are those who don’t have access to the modern banking system that exists today. This includes many segments of the population. Ethereum’s decentralized financial ecosystem will allow people to access financial accounts, credit, investment opportunities, and more.