The first phase of Ethereum 2.0 was on Tuesday, December 1, 2020. In an article on their site, Coinbase indicates that it plans to launch the major upgrade with the implementation of a staking service for Ethereum soon; the platform will fully support ETH 2.0 with the implementation of staking and trading functionalities.
The long-awaited first of December date for Ethereum fans has finally arrived.
Ethereum 2.0 is launched and is accompanied by a rise of the ether price which exceeds 600 dollars. The value of this second blockchain is close to 70 billion dollars. But one wonders how this update is really going?
Since its launch in 2015, Ethereum has become the most widely used decentralized network in the crypto-sphere. It was then necessary to rethink and redefine the architecture of the network in order to provide solutions to the problems the network is facing: one of the main problems of the Ethereum block chain today is scalability.
The popularity of the network has led to the execution of a large number of transactions on Ethereum's multi-chain public network and these transactions have begun to test the network's scalability limits. Block generation is limited to 7-15 transactions per second. This transaction congestion results in long waiting times for Ethereum users.
Ethereum 2.0 is the update of the Ethereum blockchan. Eth2.0 refers to a set of interconnected updates that will make Ethereum more scalable, secure and sustainable.
These updates are realized by several teams of the Ethereum ecosystem.
The upgrade aims to improve:
Network efficiency: Most poof of stake networks have a small set of validators, allowing for a more centralized system and reducing network security. Ethereum 2.0 requires a minimum of 16,384 validators, which makes it much more decentralized and therefore more secure.
The scalability of the Ethereum network: the network will be able to process more transactions; with Ethereum 1.0, the network could only handle about 30 transactions per second, which caused delays and congestion on the network.
Ethereum 2.0 promises up to 100,000 transactions per second.
ETH 2.0 will be launched in three phases:
- The first phase 0: known as the Beacon Chain, it was just launched yesterday, December 1st and involves the introduction of Proof of Stake alongside the pre-existing Proof of Work mechanism. The latter (POS) is designed to minimize the disruption of normal chain activities during these early stages of transition.
- Phase 1: Shard chains will be introduced in Phase 1, scheduled for 2021, to accelerate the network's path to greater scalability. The network is expected to be launched with 64 shards (allowing 64 times the throughput of Ethereum 1.0) although at launch they will not support accounts or smart contracts.
- Phase 2: is planned somewhere in 2022 and will unlock the other features of the Ethereum Shard chain.
It will also add Ether accounts and allow transfers and withdrawals, implement cross transfers and contract calls. This second phase will create runtime environments for scalable applications that are built on Ethereum 2.0.
The PoW mechanism will be retired in Phase 2, with the Ethereum 1.0 data being absorbed into the ETH 2.0 public network.
In September 2020, the developers of Ethereum 2.0 had launched a new test network.
This new test followed the test of Spadina which had encountered problems during its launch, which had forced to do at least one more 'dress rehearsal' before the launch.
Spadina is a short-term testnet designed to test the genesis, or creation of the first block, on Ethereum 2.0. It differs from the larger testnet Medalla, which is a general sandbox representing the operational version of the network.
The problems with the Spadina testnet were related to low participation, associated with 'confusion' and 'invalid repositories'.
Testnets to test different parts of the Eth 2.0 launch began to be deployed in 2019.
Medalla is the first Eth 2.0 Phase 0 Testnet supported by the Ethereum Foundation.
This testnet was preceded by a series of other tests such as Goerli and Schlesi.
Danny Ryan, researcher at the Ethereum Foundation said in an article entitled 'eth2 quick update no. 16' on September 14, 2020:
'The main objective is to give us all another chance to go through one of the most difficult and risky parts of the process - deposition and genesis - before we start the main network.
If all goes well, this should give us greater peace of mind before we embark on the most difficult and interesting part. '
The new version of Ethereum will notably allow to make the network more scalable and to move from proof of work to proof of stake.
The proof of work is a method of validation of the blocks of transactions which consists in using the computing power of a machine while the proof of stake is a method of validation of the blocks of transactions which consists in proving the ownership of a certain amount of crypto-currency.
In Proof of stake, miners run nodes and expend computing power to solve complex mathematical problems in a contest to exploit the next block.
The Proof of Stake replaces the two main components of PoW (miners & electricity) with validators and issues on Ethereum 2.0. In general, validators replace miners as individuals who maintain the agreed state of the grid and receive rewards for random selection of the next block.
Proof of stake is thus the most important change in Ethereum 2.0, as it reforms the crypto-economic incentive structure for blockchain validation. It will change the way the network operates in many ways. The transaction validation mechanism will shift from extraction to play, making the network more secure. Validators will have to stake out 32 ETH to run a node. Validators will be randomly selected and rewards will be awarded for each successfully verified block added to the network.
The main advantage of PoS is that it is much more energy efficient than PoW, as it decouples energy-intensive computing from the consensus algorithm. PoS will reduce the energy consumption of the network, as validators do not need a huge amount of computing power to participate.
We previously talked about dropping 32ETH in order to activate the validation software for ETH 2.0, this is called staking.
The validator is responsible for storing data, processing transactions and adding new blocks to the blockchain.
Theoretically, anyone can participate in the staking of any blockchain using a proof-of-stake consensus.
For Ethereum, it is a question of reorganizing the whole Ethereum platform, effectively launching a new, more scalable version.
Note that the major difference between Bitcoin and Ethereum networks is the way it validates transactions.
The Bitcoin network uses proof of work (PoW) while Ethereum moves from proof of work to proof of stake (PoS). Proof of stake means that you show your commitment to the network by blocking, an ETH deposit to participate as a network validator.
This will happen when Ethereum upgrades its network to version 2.0, an enhancement that will be completed in 2021 according to previous phases.
A validator is thus a participant of the Ethereum network that manages the nodes that propose and validate the blocks of the tag chain. To be able to 'propose and validate', validators must involve the ETH they own.
However, the network can sanction validators who try to propose false blocks or act in a malicious way. Also, validators will have to be online consistently, under penalty of minor sanctions.
The ETH's rate of return on play is expected to be approximately 4-10%. A program called 'slashing' will be applied to any validator acting maliciously towards the network by taking a portion of the validator's stake.
It is important to know that during a Staking, one has:
The possibility of generating income by holding the cryptocurrency;
Rewards are given for actions that help the network to reach a consensus. You will be rewarded for consolidating transactions into a new block or checking the work of other validators, as this is what allows the chain to operate securely.
The requirement to have 32 ETHs to become a full validator or a few ETHs to join a placement group. You will also have to manage an 'Eth1' or mainnet client. The launch pad will guide you through the processes and hardware requirements. You can also use a management API.
However, by staking, users lock their assets in crypto for a defined period of time. Thus, while you can be rewarded for work that benefits the network, you can lose ETH for malicious actions, being offline and not participating.
The holders of Ethers (ETH) will soon have the possibility to do staking with their tokens on Coinbase. The platform intends and has presented plans to support ETH2 through staking and trading. Coinbase customers will be able to convert the ETH in their Coinbase accounts to ETH2 and earn staking rewards.
While the ETH2 tokens wagered remain locked in the tag chain, Coinbase will also allow trading between ETH2, ETH and all other supported currencies, providing liquidity to our clients.
Source: coinbase blog
On its blog, via an article titled 'Ethereum 2.0: Staking rewards coming soon to Coinbase', the company said:
'While ETH2 tokens that are wagered remain locked on the tag chain, Coinbase will also allow trading between ETH2, ETH and all other supported currencies, which will provide liquidity to our customers'.
'We will launch the above functionality to customers in eligible jurisdictions beginning in early 2021. We will provide more details as we approach the launch of each functionality. »
Ethereum holders who choose to put their coins on deposit will not be able to withdraw or transfer their participation until the end of Phase 1 - a process that could take years. Several companies, including Darma Capital, are planning to offer intermediary bids that would allow users to continue to access their capital.
Coinbase is therefore taking the lead on Ethereum staking, as its users will be able to easily do ETH 2.0 staking if they have ETH tokens on the crypto exchange, which today has more than 30 million users worldwide.
The Magna Numeris team is delighted with this update of Ethereum. And you, what do you think about it?
Written by Laetitia Harson, Project Manager
Cartam: Free Marketplace for Cryptocurrency Users
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