What is Ethereum 2.0? The upgrade that comes with Proof of Stake

Ethereum 2.0, or Eth2, is a major upgrade of the Ethereum network developed to improve performance, security, and scalability to accommodate rapidly growing usage. The main change in Ethereum 2.0 is the transition from the energy-intensive Proof of Work (PoW) consensus mechanism to the new Proof of Stake (PoS) system, which is more environmentally friendly and more efficient.

Get to know Ethereum 2.0

Ethereum 2.0, also known as "The Merge," is a network upgrade that has been gradually rolled out since 2020. It is divided into several phases to ensure a more efficient and smoother transition, with key improvements including

• The transition from Proof of Work (PoW) to Proof of Stake (PoS): Changing the method of transaction verification from using energy for mining to using ETH coins to select validators.
• Improving transaction scalability: Increasing the ability to process transactions faster and accommodate more users.
• Reducing energy consumption: PoS uses significantly less energy than PoW, making Ethereum 2.0 more environmentally friendly.

What is Proof of Stake (PoS)?

Proof of Stake (PoS) is a transaction verification mechanism that reduces energy consumption without the need for mining machines. Validators simply lock ETH coins in the system, granting them the right to verify and add new blocks to the blockchain. PoS randomly selects Validators based on the number of coins locked and the duration of holding, resulting in a significant reduction in resource and energy usage.

Advantages of Proof of Stake (PoS):

• More energy-efficient: PoS reduces the need for energy and hardware, making Ethereum a more environmentally friendly system.
• Flexible and fast: Transaction processing is quicker and supports a variety of applications.
• More open participation: Becoming a Validator in the PoS system does not require expensive mining machines, but instead requires locking ETH coins, making it easier for the general public to participate.

The upgrade of Ethereum 2.0 in each phase

Ethereum 2.0 is divided into three main upgrade phases, namely

• Phase 0 – Beacon Chain: Launched in 2020 to introduce the Beacon Chain, which is a PoS blockchain serving as the main infrastructure for managing the PoS network and transaction verification.
• Phase 1 – Shard Chains: This involves splitting the blockchain into multiple pieces or Shards to increase the ability to process transactions simultaneously in several parts, accommodating more users and transactions.
• Phase 2 – The Merge and Beyond: This final phase involves merging the Beacon Chain with the main Ethereum network, fully transitioning the entire system to PoS and enhancing the network's performance.

Advantages of Ethereum 2.0

Ethereum 2.0 comes with clear advantages in terms of energy efficiency and the ability to support a wider range of applications, as follows:

• Reduce energy consumption: PoS helps reduce energy consumption by up to 99% compared to PoW.
• Faster processing: With the implementation of Shard Chains, Ethereum 2.0 can handle a large number of transactions simultaneously.
• Safer and more stable: PoS enhances the network's security by distributing validators more widely, making network attacks more difficult.
• Transaction costs decrease: A more efficient system will reduce transaction costs in the long run.

Challenges and Limitations of Ethereum 2.0

Despite its many advantages, Ethereum 2.0 still faces challenges such as

• The complexity of the upgrade: Upgrading a large network like Ethereum takes a long time and requires thorough verification.
• User and developer adaptation: PoS is a concept different from PoW. Users and developers need to learn and adapt to the new system.
• Staking: Those who want to be Validators must lock coins in the system, which may be a limitation for those with limited capital.

Ethereum 2.0 is a significant upgrade that takes Ethereum to the next level with its highly efficient and energy-saving Proof of Stake system. This change not only reduces energy consumption but also enhances transaction capacity and system security. However, the complexity of the upgrade and user adaptation are aspects that need to be closely monitored.