Ethereum 2.0 Guide: What It Is and How It Works
Ethereum 2.0 is the name given to the upgrade made on the main network to improve the transfer performance of Ethereum (ETH) blockchain network and ERC20 tokens on the blockchain network, ensure its wide acceptance, and increase security.
One of the most important problems in the 1.0 system, which was the first version of the Ethereum network, was the scaling problem. With Ethereum 1.0, only 15 transactions can be made per second, which causes transfers to take a very long time and transaction fees to increase. The recent increase in transfer fees was met with reaction from many users. In August 2020, transfer fees had risen to approximately $12.
With the transition to Ethereum 2.0 version, the number of transactions per second will reach 100,000. This increase will positively affect transfer speeds and transfer fees first.
The most important change between Ethereum 1.0 version and Ethereum 2.0 version is the transition from Ethereum 1.0 Proof of Work consensus algorithm to Proof of Stake algorithm.
What is the Difference Between Proof of Work and Proof of Stake?
In the Proof of Work system, miners solve complex calculations for transaction processing using computers or their devices. This requires high processing power, labor, and high energy consumption. The miner who successfully completes this complex process receives a reward.
In the Proof of Stake system, miners process transactions according to the amount of Ethereum they own and earn rewards proportionally. In this system, miners are given work according to their holdings, saving energy, labor, and time. They are only responsible for the portion corresponding to their Ethereum holdings.
Another advantage of the Proof of Stake system is security. It is more resistant to 51% attack attempts on cryptocurrency networks because balances and transactions are distributed.
How Will the Transition to Ethereum 2.0 Version Happen?
The transition to Ethereum 2.0 will not happen instantly. The process will continue through 3 main phases. It began on December 1, 2020.
In the first phase, operations will continue over 2 different networks and will run parallel with miners working in the Proof of Work system. This way, transaction continuity will not be harmed.
In the second phase, Proof of Stake miners will begin taking over operations. However, accounts and smart contracts will not be included in this transfer process.
In the third phase, the transition will be completed when accounts and smart contracts also begin operating through Proof of Stake.
This transition process and the 3 phases are aimed to be completed in 2022.
The complete transition to Ethereum 2.0 version will be revolutionary for both Ethereum and other cryptocurrencies operating on the Ethereum blockchain network's ERC-20 network.