What Is Ethereum 2.0? What You Should Know

Ethereum 2.0 was an upgrade to the Ethereum blockchain. It consisted of three core steps, two of which were completed. The third step was deemed no longer necessary as other technology was developed faster than expected.

This upgrade helped to make the Ethereum ecosystem more scalable, secure and sustainable.

Ethereum 2.0 consisted of three core steps, two of which were completed:

1. Launch of the Beacon Chain — complete
2. The Ethereum Merge — complete
3. Ethereum Sharding — replaced by layer 2 rollups

Step 1: Ethereum Beacon Chain

The addition of the Beacon Chain was the first stage in the upgrades. This was a test to see if the network could handle a proof-of-stake mechanism. Before the upgrade, Ethereum was using a proof-of-work mechanism that was less secure and energy efficient. During this process, the network still relied on the proof-of-work mechanism.

After the Beacon Chain test was successful, it was time for the merge.

Step 2: Ethereum Merge

The Ethereum Merge followed the introduction of the Beacon Chain. It combined the blockchain data that has been collected since Ethereum’s inception with the data collected on the Beacon Chain, creating one mechanism dedicated to the proof-of-stake consensus.

While the proof-of-work still exists, it has been altered so that it’s no longer profitable for miners to use it. Post-Merge, it’s estimated that the amount of energy used for Ethereum decreased by 99.95%.

Step 3: Ethereum Sharding — Layer 2 Rollups

Sharding was the last stage of the update, but it was dropped from the roadmap.

What Is Sharding?

Sharding divides data into smaller subsets, which reduces transaction times and network congestion on the blockchain.

The belief is that increasing data availability removes the need for expensive computing hardware. Therefore, anyone with a regular phone or laptop will be able to contribute to securing the network.

What Are Layer 2 Rollups?

Layer 2 rollups is another scalability tool that was quickly developed. It refers to taking hundreds of transactions completed on layer 2 — a secondary blockchain of Ethereum — and “rolling up” or bundling them into one transaction on layer 1, which is Ethereum’s base blockchain. This process has been able to provide scaling without the step of sharding.

How to Participate in Ethereum

People can participate in Ethereum through staking. This is when you essentially put your Ethereum in a digital vault to help the network validate transactions. Stakers are paid for this. However, you have to have at least 32 ETH to stake.

The Future of Ethereum

People who participate in Ethereum have these goals for the future of the network:

1. Cheaper transactions: The current effort to reduce fees is focused on reducing data storage costs through Proto-Danksharding — moving data from Ethereum to temporary storage.
2. Extra security: Planned improvements to Ethereum’s security include increasing liquidity, protecting users from spam attacks and from failures in the network, hardware and software.
3. Better user experience: Ethereum is aiming to make itself easier to use through protection for lost or stolen wallet keys and making nodes more accessible for the less tech-savvy.
4. Future proofing: To keep itself both relevant and reliable, Ethereum is developing upgrades to protect the network from anticipated future threats.

Chris Ozarowski and Amber Barkley contributed to the reporting for this article.