Ethereum is at home straight to the new network environment. Faster, cheaper, more secure: Ethereum 2.0 wants to do it much better than its predecessor.
Everything points to Ethereum in the new year. With the switch to Proof of Stake (PoS), the network is about to undergo the most significant upgrade in 2022. Preparations for the “merger”, the merger of the current Ethereum Blockchain with the PoS-based Beacon Chain, have been in full swing for months and it’s becoming clear that developers will be able to meet the deadline set for about the middle of the year. But why is the update so important in the first place?
“Merge” Ethereum scale
Ethereum is by far the largest network for decentralized applications. So big that it is now in its own way. The performance of the smart contract platform is simply not designed for the rapid growth of decentralized finance (DeFi), blockchain gaming, and NFTs. Ethereum, which like Bitcoin also uses a proof-of-work consensus, is clogged. The reason: the throughput is just 15 transactions per second (TPS). Too little to keep up with the attack. The result: high fees. According to bitinfocharts average transaction fees are currently US $ 26. A disaster for an inclusive monetary system.
Scaling solutions like polygons or ZK stacks, which outsource transaction processing to transfer bundled them to Ethereum’s main chain, are already catching up. But while these reduce costs and significantly increase performance, there are workarounds. With the transition to version 2.0, which goes through several phases under the codename “Serenity”, Ethereum provides its own answer to the shortcomings of scale.
Why proof of stake?
Unlike proof of work, validators, also called stakers, are no longer responsible for processing transactions and creating new blocks on a proof of stake network. One subtle difference: Instead of using computing power, the network is protected by temporarily locked ether reservoirs. As a result, Ethereum uses about 99.95 percent less energy than before. To ensure compliance with network rules, Ethereum 2.0 relies on rewards and penalties. “Honest” validators receive a return on their participation, “malicious” or inactive validators are penalized by the algorithm and lose their participation. This process is also known as cutting.
Proof of Stake ensures low power consumption, creates new investment opportunities, and also protects the network from 51 percent attacks. But what about the scale? The sharding function is supposed to take care of that. With chunking, the “chunking” of the blockchain, transactions on the beacon chain are initially shifted to 64 chunk chains. Basically a separate Layer 2 solution: since the nodes do not have to store the entire blockchain, but only parts of it, and the transactions are divided into several parallel chains, the performance of the transactions increases. Combined with Layer 2 rollup packages, the developers are targeting a value of 100,000 TPS. But: the introduction of fragmentation will take a long time to come. Originally planned before the merger, the rollout was postponed until 2023 due to the increase in existing scaling solutions.
Testnets wherever you look
The importance of Ethereum 2.0 can only be seen in the number of testnets in which the functionality of the various updates is verified and, above all, the security breaches. Since the transition from the main network is similar to open heart surgery, all new functions must first undergo thorough audits. In addition to “Görli”, “Kovan”, “Rinkeby”, “Ropsten”, “Prysm” and “Medal”, “Kintsugi”, which offers a full simulation of Ethereum 2.0 environments, is also available from December 20.
Unlike the other sandboxes, Kintsugi is designed as a long-term testnet. Users: Within the public access network, you can get a first impression of Ethereum 2.0 and experiment with “post-merger Ethereum,” as developer Tim Beiko writes in a blog post. Therefore, Kintsuge should primarily serve to “identify early problems”. Corresponding deficiencies would flow into the improvement of the customer’s software. Then “one last series of testnets will be started” and finally “will run through The Merge.” And then finally: The mainnet transition from Ethereum to Proof of Stake.
There is still a lot on the agenda
But it doesn’t stop there. The PoS change is also the most important, but only part of the Ethereum 2.0 roadmap, which is likely to be revised several times over the next year. Mainchain docking to beacon chain, proof of stake, the new ETH 2 asset, a new virtual machine, sharding, cross-linking to allow shard chains to communicate with each other – developers are still busy. It will be a few years before the Ethereum 2.0 vision is fully implemented. However, in the end, Vitalik Buterin’s vision of Ethereum as a world computer could become a reality. The most important course for this will be set in the new year.