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Ethereum 2.0 – What does it offer?
The blockchain is proving to be a revolutionary concept in the global market. Financial services, fintech, agriculture, and healthcare have all seen its influence. By making cryptocurrency a safe and secure place, it has driven the idea of cryptocurrencies.
More than 2000 cryptocurrencies were launched in January 2010. Ever since then, Ethereum has become one of the world’s largest cryptocurrencies and is ranked 2nd, only behind Bitcoin.
The decentralized system used by crypto makes building smart contracts and DApps very easy. In the following article, you will learn everything you need to know about Ethereum. It serves as a guide for anyone looking to get started with crypto trading.
What is it?
The Ethereum 2.0 blockchain is an improved version of its older self. Newer and better features have been added to this version. The system has improved scalability, efficiency, and speed. All these advancements enable it to handle more transactions at once.
Ethereum 2.0 has been called Eth2 or serenity. In comparison with its earlier version, Serenity has improved in terms of structure, working, and design. This version introduces two important changes: ‘proof of stake’ and ‘sharding’.
Ethereum is switched to Ethereum2 in order to make it a better and more sustainable place for financial services. Most of the changes were related to scalability.
The older version was only able to support 30 transactions in one second. The platform became quite slow and congested because of this issue. With eth2, however, this is not the case. A 100,000-transaction-per-second rate is achieved in this version, which indicates the level of improvements made. This can be achieved by using shard chains.
Proof-of-work vs. Proof-of-stake
The consensus algorithm in eth2 has also undergone a major change. Compared to the older version, the serenity uses the proof of stake algorithm. Proof of Stake does not rely on miners for computing power.
Instead, PoS requires the owners to vote. From the name itself, it is clear that users must vote for the authenticity of the transactions coming in. The validators of PoS are considered honest since they have the objective of securing their holdings.
What is sharding?
Sharding is the process by which a single blockchain is split into multiple blockchains, which are referred to as shards. With shards, the platform becomes much more efficient and faster. This makes it better because the workload is not piled on one validator anymore.
There are multiple validators for each shard. The shards are usually shuffled amongst the validators every day in order to prevent any sort of risk from manipulation.
In Ethereum 2.0, the most important part is the validators. They are the ones who are responsible for maintaining the platform and making it work. Both the signing key and the withdrawal key are assigned to each validator. It performs tasks for the blockchain as a signing key.
Validators are responsible for three main duties:
- Contribute to the development of blocks for the shard chain.
- Attestation of the beacon and the shard chain
- For the reporting of wrongful behavior by other validators.
These are the reasons why the signing key must be present at all times. Om the other hand, the withdrawal key performs on the funds. Therefore, it does not have to be available at all times. Since all the funds are under its control, it is important that security is present.
To become a validator, all that needs to be done is lock up 32 ETH in the beacon chain. Validators work in groups of 128. They vote, and these votes further have different categories.
- LMD GHOST votes – these votes are set for the blockchain, mostly for the latest block on which the validators agreed.
- Casper FFG votes – these act as checkpoints in the current epoch.
There was a need for improvements on the older version. The developers realized that more transactions needed to be handled at the same time. This was accomplished without increasing the node size.
These nodes play an integral role in storing and running the blockchain. It was an impractical idea to increase its size, so they did not want to do it. Only those with advanced, expensive computers could benefit from this.
By adding shards, the load on the network is divided and distributed across 64 chains. This will help make the room run smoothly, and not be too congested from time to time. More transactions can now be processed simultaneously without the need for slow processing speed.
Will it affect the price of Ethereum?
There will be multiple changes in Ethereum as proof of work transitions to proof of stake. Changes to the platform do not only include speed and structure, but also nontechnical things such as price.
There is no doubt that this upgrade will positively impact the price and value in the next couple of months or maybe even years. Due to the improvements made in Serenity – more speed, lower price, and more utility – the demand for transactions will increase.
Ethereum 2.0 has become the world’s most famous and highly anticipated project. Thousands of projects have been built with Ethereum. Through the advancements and upgrades, eth2 will gain more attention from investors, traders, and the public sector. However, it is yet to be seen how this project performs in the longer run.
