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www.montrachet.coWhat is Ethereum 2.0? Why is it Important? Ethereum Serenity, described by Van Loon, is a different blockchain from what we know to be Ethereum in its current form. The planned update won’t demand a hard fork of the original chain.
The door to Ethereum 2.0 will be accomplished by a one-time deposit of Ether from the old chain to the new via smart contracts. This will be a one-way transaction, after which the use of the legacy Ethereum system is expected to stop.
Legacy system versus new designThe reason behind the change came by clear limitations in the old design. The Proof of Work algorithm and other parts of the architecture could not cope with developers’ demand. Some of the main issues are:
Scalability: it is a well-known fact that the world computer that was the original aim of Ethereum is slow. Right now, the protocol is overwhelmed by all the Decentralized Applications and Smart Contracts running in it. Some improvements were made in this front, but it became clear that a Proof of Work blockchain could not cope with demand.
Security: there were never significant security breaches in Ethereum. But it is known that some improvements could be made. This is a focus for Ethereum 2.0, which aims to create a more robust platform.
A new virtual machine: one of the great innovations of Ethereum, was the release of a virtual machine. This is the part that runs the smart contracts and makes the protocol a world computer. The issue is that it is very slow. This is a problem because each transaction in Ethereum updates the global state of the network. Right now, the EVM is a bottleneck in the system.
Proof of Stake (PoS)The PoS consensus algorithm is the biggest change in Ethereum 2.0. The mechanism uses stakes instead of electricity as a measure of validity. In a PoW blockchain, the chain with the hash power behind it is considered valid. In a PoS network, the chain with the highest staked resources is the one valid.
Also, validators become the new source and propagators of blocks. These are users who have locked at least 32 coins. These coins allow the validator to enter a lottery to be selected as the next block’s creator and claim its rewards. If a validator goes offline or acts dishonestly while it is an active part of the network, some or all of the Ether used to become a validator will be taken away.
Another big change in the system is the use of side-chains known as shards. As we have discussed before, transaction throughput is one of the major problems of the current system. In its existing architecture, this problem doesn’t appear to have a solution. This is why the creation of separate smaller chains that can attract unique use cases is a significant improvement.