❓❓❓ What the heck is Ethereum 2.0 anyway ❓❓❓

[HB Wallet]

Even though Ethereum 2.0 doesn’t look like it is ready for widespread adoption yet, the date of the first testnet is coming closer and closer. The testnet launch of Ethereum’s Istanbul has been set for October 2, 2019. This is the first time we have ever seen the adoption of the PoS protocol at this level.

You can read more at HB Wallet's website.

Feel free to give your thoughts on this new chapter of Ethereum!


What is Ethereum 2.0?

Ethereum 2.0 (also known as “Serenity”) refers to the next major upgrade of the core Ethereum blockchain, offering several improvements to Ethereum’s current protocol, or “Layer 1”. More specifically, Ethereum 2.0 has two major goals:

• Migrate its consensus mechanism from Proof-of-Work to Proof-of-Stake, which will eliminate the need for expensive PoW mining.
  
• Introduce Sharding, an attempt to improve the speed and throughput of ETH transactions.

Instead of trying to build these upgrades directly onto the mainnet, Ethereum 2.0 will build out a new, separate platform from the main chain that will eventually replace it in the future.

Why is Proof-of-Stake?

Ethereum, Bitcoin and many cryptocurrencies are running on a Proof-of-Work protocol.

In this consensus system, the miners solve cryptographic puzzles to “mine” a block so as to add it to the blockchain. When a miner solves a puzzle using their computing processing power, they present their block to the network for verification. The first miner to solve the puzzles gets a reward for their work.

However, there are some fundamental flaws in this kind of system:

The process of mining literally eats up an immense amount of energy and computational usage.

Companies and individuals who can afford more powerful ASICs (application-specific integrated circuits) with faster processing usually dominate the mining share than others. This practice makes the system isn’t as decentralized as it tends to be. The graph below shows the market share of the most popular bitcoin mining pools recently, reported by Blockchain.com:

Here is the hashrate distribution of the largest mining pools in Ethereum, according to Etherchain.org:

Theoretically, these big mining pools can successfully launch a 51% attack on the network if they team up with each other. Now, that's concerning right?

This is why Proof-of-Stake comes to the picture.

Proof-of-Stake will make the entire mining process virtual as well as replace miners with 'validators'. The primary advantages of PoS include energy efficiency, security and achieving another level of decentralization.

This is the way it will work:

• To become a validator, you will have to lock up some of the blockchain-based currency as stake.
• Instead of ‘mining’, validators will take turns proposing and voting on the next block by placing their bets on it. The value of each vote depends on the size of its deposit that the validator puts in. If the block gets appended, the validator will get a reward proportionate to their bets.
• The process of creating and verifying new blocks is done through a consensus algorithm wherein all current validators can participate.

Advantages of Proof of Stake:

• Reduces the overall energy and monetary cost. According to Digiconomist, bitcoin mining currently consumes 73.12 terawatt-hours (TWh) per year. That’s comparable to the total energy consumption of Austria, a country of 8.9 million people! Imagine how much money miners spend per year on using such significant amount of power - $7,430,140,088 U.S. Dollar it is. On the other hand, Proof of Stake makes the transaction process completely virtual and cuts off all these costs.
• Reduces centralization risks as in the Proof of Stake mechanism, there will be no ASIC advantage. This means the whole process wouldn’t depend on who owns better equipments or ASICs, achieving a whole new level of decentralization.
• Uses economic penalties to negate the 51% attacks, making various forms of 51% attacks vastly more expensive to carry out than Proof-of-Work.

Proof of Stake made simple with Casper

Casper FFG (also known as Vitalik’s Casper) is a hybrid PoW/PoS consensus mechanism. Between the two versions of Casper - Casper FFG and Casper CBC (Vlad Zamfir’s Casper), Casper FFG is going to be implemented first.

Casper FFG is designed to ease the transition into proof-of-stake by overlaying on top of the normal ethash proof-of-work protocol. Every 50th block mined in the PoW is going to be a PoS checkpoint where finality is assessed by a network of validators.

Casper has implemented a process by which Ethereum 2.0 can punish all malicious elements. Anyone who acts in a malicious manner will get immediately punished by having their stake slashed off. This is what makes it differs from most other PoS protocols.

Recently, there are two types of punishment:

• Inactivity leaks: if your validator node goes offline for 18 days, and the beacon chain is not finalizing, then your balance will be reduced by up to 60.8% slash in 18 days.
• Slashing: if a validator behaves provably maliciously, then they are slashed by having their balance reduced. Minimum penalty is 1 ETH, but it goes up linearly in the number of people slashed at the same time as you.

Ethereum 2.0 Roadmap and Phases

There are seven distinct phases for Ethereum 2.0, which will likely take several years to implement. It’s important to keep in mind that this upgrade will not take place at a single point in time but instead, it will be rolled out in phases. Most of these phases are still in research, without clear technical specifications.

However, before developers can build on Ethereum 2.0, there are three phases that will need to be completed initially:

Phase 0 — Beacon Chain

The Beacon Chain is a proof-of-stake chain that will run parallel to Ethereum’s proof-of-work chain. The chain will manage the Casper protocol for itself and all of the shard chains. Initially, the Beacon Chain will be engineered for simplicity and will support neither smart contracts nor accounts. In this phase, Casper the Friendly Finality Gadget (FFG) will be used for finality. Finality, in very loose terms, means that once a particular operation has been done, it will forever be etched in history and nothing can revert that operation.

Phase 1 — Shard Chains

Shard chains are the key to the future of scalability. Sharding is intended to help transactions scaled by dividing the network across multiple shards, allowing the network to process many transactions concurrently.

Sharding is a term that often seen in database systems. Supposedly, you have a huge bulky database for your website, which not only makes searching for data slower, but it also hinders your scalability. What if you do a horizontal partition on your data and turn them into smaller tables and store them on different database servers? Let’s take a look at this example:

By splitting a state (the ‘combined data root”) and history of Ethereum into partitions that we call “shards”, the system can process many transactions in parallel as there exists some forms of cross-shard communication capability, where transactions on one shard can trigger events on other shards. As a result, sharding will greatly increase the blockchain’s throughput.

However, if we are using PoW, the smaller shards can be easily taken over by malicious miners due to their low hashrates. This is the biggest reason why PoW mechanism can never implement sharding. In PoS, this risk is completely mitigated, since it doesn’t have the concept of mining.

Phase 2 — eWASM

The eWASM is essentially a rebuilt Ethereum Virtual Machine that supports proof-of-stake and sharding. It will introduce smart contracts, accounts, and more to Ethereum 2.0.

The staged rollout of Ethereum 2.0 is intended to test each upgrade to the protocol in a safe environment without compromising security.


Continue to Staking FAQs

[ArmyJune]

Thanks so much for this. A very clear explanation. I can see how the Ethereum team is doing their best to achieve a decentralized future. The bet placing idea is very enticing. Hope it would attract many users.

[qwizzie]

What are the disadvantages of switching from PoW to PoS ?
I'm asking this, so that we can have an objective discussion.

[crazy-pilot]

Thanks for this info, buddy. Can you talk about what you think about the downsides of switching from PoW to PoS, will Ethereum 2.0 be successful? I think this is a huge step in the development of Ethereum, I want to see this miracle.

[FLHippy]

What are the disadvantages of switching from PoW to PoS ?
I'm asking this, so that we can have an objective discussion.

I think that people are afraid about the centralization with upcoming consensus switch to Proof of Stake.
More you hold, more power you have.
I don't like the new update because you have to stake at least 21 ETH to get the reward. Why they can´t do it as ICON - you can start stake with only 1 ICON.

[VIP BTC]

What are the disadvantages of switching from PoW to PoS ?
I'm asking this, so that we can have an objective discussion.

disadvantages of using POS:
1. POW security is better among Proof of Stake because POW has security with a decentralized system that is arranged in one block (Hash),
2. With the POS system, the price of coins will be easily attacked, for example, someone who has a lot of coins will become the ruler in this proof of stake system.
3. in addition, the supply of coins in proof of stake is not limited, this will greatly affect the fall in the price of coins while POW limits the amount of coin inventory so that the price can increase with the scarcity of the coin.

please correct if wrong.

[HB Wallet]

What are the disadvantages of switching from PoW to PoS ?
I'm asking this, so that we can have an objective discussion.

disadvantages of using POS:
1. POW security is better among Proof of Stake because POW has security with a decentralized system that is arranged in one block (Hash),
2. With the POS system, the price of coins will be easily attacked, for example, someone who has a lot of coins will become the ruler in this proof of stake system.
3. in addition, the supply of coins in proof of stake is not limited, this will greatly affect the fall in the price of coins while POW limits the amount of coin inventory so that the price can increase with the scarcity of the coin.

please correct if wrong.

Thanks for this. I just want to list out a few points in addition:

-"Pure" Proof of stake consensus algorithms give stakeholders the ability to monopolize the network, an attacker can capture the system and sell the resources they used to attack the system (which are coins). The price of coin can drop drastically.

-Since it has to depend on the online validator nodes, the system may not function as intended if there is a decrease in these nodes.

-If a validator loses their deposit, which is equivalent to losing all their hardware. People may find it discouraged to participate.

-It can take an enormous amount of disruption in order to end an attack event.

I believe that Vitalik and the team have already measured some of these problems in proper PoS mechanism. That's why they're going for a hybrid model PoW/PoS and implementing Casper. Correct me if I'm wrong.

[bbc.reporter]

What are the disadvantages of switching from PoW to PoS ?
I'm asking this, so that we can have an objective discussion.

Also, is it an upgrade or a reboot of the platform? It appears Vitalik created a new platform and called it Ethereum 2.0. Is it his acknowledgement that Ethereum 1.0 has failed?

[HB Wallet]

What are the disadvantages of switching from PoW to PoS ?
I'm asking this, so that we can have an objective discussion.

Also, is it an upgrade or a reboot of the platform? It appears Vitalik created a new platform and called it Ethereum 2.0. Is it his acknowledgement that Ethereum 1.0 has failed?

Serenity exists as a wholly new chain alongside the current chain. As we mentioned above, they will use Casper FFG to ease up the transition from Eth1 to Eth2 by overlaying it top of the existing network as an additional layer. You can read more about the technique they use at Ethhub.

Vitalik says that the transition to Eth2 is a way to bring technical improvements. It tends to fix the various problems highlighted by Ethereum 1.0 (Scalabity, Security and Decentralization etc).

[ArmyJune]

What are the disadvantages of switching from PoW to PoS ?
I'm asking this, so that we can have an objective discussion.

Also, is it an upgrade or a reboot of the platform? It appears Vitalik created a new platform and called it Ethereum 2.0. Is it his acknowledgement that Ethereum 1.0 has failed?

Serenity exists as a wholly new chain alongside the current chain. As we mentioned above, they will use Casper FFG to ease up the transition from Eth1 to Eth2 by overlaying it top of the existing network as an additional layer. You can read more about the technique they use at Ethhub.

Vitalik says that the transition to Eth2 is a way to bring technical improvements. It tends to fix the various problems highlighted by Ethereum 1.0 (Scalabity, Security and Decentralization etc).

Wait. Just try to make it clear. So they just add Casper as an overlay to the existing proof of work system right?

[HB Wallet]

What are the disadvantages of switching from PoW to PoS ?
I'm asking this, so that we can have an objective discussion.

Also, is it an upgrade or a reboot of the platform? It appears Vitalik created a new platform and called it Ethereum 2.0. Is it his acknowledgement that Ethereum 1.0 has failed?

Serenity exists as a wholly new chain alongside the current chain. As we mentioned above, they will use Casper FFG to ease up the transition from Eth1 to Eth2 by overlaying it top of the existing network as an additional layer. You can read more about the technique they use at Ethhub.

Vitalik says that the transition to Eth2 is a way to bring technical improvements. It tends to fix the various problems highlighted by Ethereum 1.0 (Scalabity, Security and Decentralization etc).

Wait. Just try to make it clear. So they just add Casper as an overlay to the existing proof of work system right?

Yes that's true. Casper FFG is a proof of stake-based finality protocol which overlays an existing proof of work blockchain. It's a partial consensus mechanism combining proof of stake algorithm research and Byzantine fault tolerant consensus theory to provide additional protections against block reversions. Basically, Casper FFG is designed to implement POS and mitigate the “Nothing at Stake” problem.

[bbc.reporter]

What are the disadvantages of switching from PoW to PoS ?
I'm asking this, so that we can have an objective discussion.

Also, is it an upgrade or a reboot of the platform? It appears Vitalik created a new platform and called it Ethereum 2.0. Is it his acknowledgement that Ethereum 1.0 has failed?

Serenity exists as a wholly new chain alongside the current chain. As we mentioned above, they will use Casper FFG to ease up the transition from Eth1 to Eth2 by overlaying it top of the existing network as an additional layer. You can read more about the technique they use at Ethhub.

Vitalik says that the transition to Eth2 is a way to bring technical improvements. It tends to fix the various problems highlighted by Ethereum 1.0 (Scalabity, Security and Decentralization etc).

Wait. Just try to make it clear. So they just add Casper as an overlay to the existing proof of work system right?

Yes that's true. Casper FFG is a proof of stake-based finality protocol which overlays an existing proof of work blockchain. It's a partial consensus mechanism combining proof of stake algorithm research and Byzantine fault tolerant consensus theory to provide additional protections against block reversions. Basically, Casper FFG is designed to implement POS and mitigate the “Nothing at Stake” problem.

I reckon that using the word overlay is a trick to cover the truth that Ethereum 2.0 is a reboot of the Ethereum 1.0 blockchain. It is a new platform where the users will migrate their coins through a smart contract. It is similar to burning your coins in the old blockchain to receive the new coins in the new blockchain. This is not what you call an overlay.

The developers also make it appear to be interested in a 2way bridge to make it appear like an overlay.

[pishite]

Thank you for this useful news, we are waiting for a small increase in the rate of Ethereum, I wanted to see it in the region of $ 300-500.
It will be able to keep the course in this area, time will tell, but interest in the coin has increased significantly.

[vladimirhf]

I think that people are afraid about the centralization with upcoming consensus switch to Proof of Stake.
More you hold, more power you have.
I don't like the new update because you have to stake at least 21 ETH to get the reward. Why they can´t do it as ICON - you can start stake with only 1 ICON.

yes, could happen the same that happened to eos where most of the top block producers now are exchanges holding a huge bag of tokens. I don't know if anything can be really decentralized based on amounts of money - censitary voting has existed in the past and we know it's a bad system.

[bbc.reporter]

Thank you for this useful news, we are waiting for a small increase in the rate of Ethereum, I wanted to see it in the region of $ 300-500.
It will be able to keep the course in this area, time will tell, but interest in the coin has increased significantly.

You might wait longer than you might expect if you speculate that the increase on the price might be caused by the release of Ethereum 2.0. I predict that Vitalik will do it similar to the SEC's decision on bitcoin's ETF. Many delays and delays of delays hehehe.

[lixer]

This was very helpful, Ethereum is working with all its best to make their users proud again and they should be commended, let us see if this new product that is to be tested first by them would create another adoption of cryptocurrency like their chain technology created in 2017 and gave opportunities to so many people who would forever be grateful including scammers lol.

I hope this new proof of stake will indeed reduce the level of energy consumption in mining this crypto because it is too much and this is what could give bad impression to the government. Imagine that thing calculate there as what bitcoin takes of energy, it means it is not even in every country that one would be able to mine, but I think with this proof of stake, it would be easier to mine in other smaller countries.

[HB Wallet]

This was very helpful, Ethereum is working with all its best to make their users proud again and they should be commended, let us see if this new product that is to be tested first by them would create another adoption of cryptocurrency like their chain technology created in 2017 and gave opportunities to so many people who would forever be grateful including scammers lol.

I hope this new proof of stake will indeed reduce the level of energy consumption in mining this crypto because it is too much and this is what could give bad impression to the government. Imagine that thing calculate there as what bitcoin takes of energy, it means it is not even in every country that one would be able to mine, but I think with this proof of stake, it would be easier to mine in other smaller countries.

Couldn't agree more. Besides price volatility, I think energy consumption in mining is one of the critical problems that makes cryptocurrency's adoption as a real-world currency quite challenging. Hope the new system could work out aforementioned issues and would be worth waiting for.

[bbc.reporter]

@lixer. Does Ethereum's reboot to Ethereum 2.0 not make it similar to an admission that 1.0 is an incompetent platform that does not work as promised?

I shake my head on why Vitalik and his team did not use proof of stake from the beginning if that was where Ethereum was going. It would have worked because Ethereum begun as an ICO.

[GreatArkansas]

My one and only question to the Ethereum 2.0 is WHEN?
WHEN it will implekented? There's a lot of humor before, around 2018 that this Ethereum 2.0 will be implemtlented but until now, there's still no sign for the update.

[HB Wallet]

My one and only question to the Ethereum 2.0 is WHEN?
WHEN it will implekented? There's a lot of humor before, around 2018 that this Ethereum 2.0 will be implemtlented but until now, there's still no sign for the update.

The first testnet of Ethereum - Istanbul has been set for October 2, 2019 (originally targeted for September 4 but was pushed back due to the large volume of Ethereum Improvement Proposals (EIPs) that were submitted for review). Sharding phases 1 and 2 will allegedly come in 2020 and 2021, respectively.