Ethereum is open-source blockchain technology. Ethereum’s original coin is called Ether – one of the largest cryptocurrencies, second only to Bitcoin (BTC). Even though Ether has a smaller market cap than Bitcoin, Ethereum is the most popular blockchain.
This article will reveal Ethereum 2 – the next generation of Ethereum, through Frequently Asked Questions. So, let’s start.
What is Ethereum 2 ?
Ethereum 2 (Eth 2.0) is the next generation of Ethereum: a significant upgrade to the Ethereum blockchain network. It requires a change from applying proof-of-work to proof-of-stake for the validation of blocks on the Ethereum blockchain. The current mining method will then end and secure the network using validators who confirm transactions and include them in the blocks. Proof-of-stake will decrease the power required to run Ethereum and help increase its flexibility to attacks. It also provides the chance to get bonuses by staking.
Ethereum 2 will have a new structure: instead of one chain, it will comprise a beacon chain that interacts with different sharded blockchains (“shards”). This approach allows parallel transactions by increasing the throughput and capacity of the network.
How is Ethereum 2 different from the older version?
Up till now, Ethereum has been a proof-of-work blockchain. In Ethereum 2, the network will be upgraded to a proof-of-stake blockchain and present a beacon chain and shard chains.
When will Ethereum 2 be launched?
Ethereum 2 will be launched in several phases within the next few years. Phase 0, the beacon chain, was released on 1 December 2020. Phases 1 and 1.5 are expected in 2021. The roadmap is available at Ethereum 2 Matters – A Journey Through Time.
How many phases are in Ethereum 2?
Ethereum 2 will have three main phases:
• Phase 0: the beacon chain. Launched on 1 December 2020. It is the core chain that handles the shards’ synchronization across the network.
• Phase 1: the shard chains. Expected in 2021. During this phase, the Ethereum’s data and transactions will be run on shard chains. These are proof-of-stake blockchains that use validators to confirm transactions, create blocks, and communicate with the beacon chain.
• Phase 1.5: the legacy Ethereum chain becomes a shard on the new Ethereum blockchain. Expected 2021. In this phase, the legacy Ethereum network will transition to a proof-of-stake network and be connected to the main Ethereum 2 chain.
• Phase 2: shards fully operating. Expected 2021+. The shard chains will be fully functioning and able to communicate with each other and run smart contracts.
What are “validators” on Ethereum 2?
With a proof-of-stake block validation process, Ethereum 2 will use validators to secure the network.
A validator on Ethereum 2 runs computer software that confirms transactions on the shards, adds them to the next block in the chain, and interacts with the beacon chain. A minimum of 32 ETH is required to be a validator, along with some technical skills.
Validators are granted for validating blocks and securing the network and are fined (“slashed”) if they behave badly or maliciously.
What does “beacon chain” mean in Ethereum 2?
Ethereum 2 will be made up of various chains: a core beacon chain connected to several shard chains (“shards”). The beacon chain in Ethereum 2 will be launched in Phase 0.
What is a “shard” in Ethereum 2?
Shards, sharding, or shard chains refer to parallel blockchains existing inside the new Ethereum 2 structure. While previously Ethereum existed as one blockchain, the new design consists of a core beacon chain connected to different shard chains (expected to be 64 initially). This approach allows parallel processing of transactions across other shards. Validators and confirmation will verify the transactions in each shard passed to the beacon chain, thus keeping agreement throughout the network.
What is the Ethereum 2 deposit contract?
As part of Ethereum 2 and proof-of-stake transition, there will be a one-way bridge for ETH holders to move their tokens to the beacon chain. It is called the deposit contract. It needs to be filled with 524,288 ETH for staking to begin on the beacon chain.
ETH tokens deposited in the deposit contract cannot be removed or transferred until Phase 1.5 of the Ethereum 2 upgrade.
Will my old ETH tokens become useless after Ethereum 2?
No, you will be able to transfer your ETH to the Ethereum 2 network. Initially, both networks will run in parallel, but in Phase 1.5, the legacy Ethereum network will transition to Ethereum 2 as a proof-of-stake shard.
Will I be able to use my existing ETH tokens on Ethereum 2?
Yes, you will be able to use your existing ETH tokens in the new Ethereum 2 infrastructure. There are two possibilities for using your ETH on Ethereum 2.
- Staking on Ethereum 2 – If you wish to participate in the validation of blocks on Ethereum 2, you may stake as a validator. To do this, you will need to send your ETH tokens to the Ethereum 2 deposit contract.
- If you do not wish to stake but want to hold ETH tokens or use them in other applications, you can wait until Phase 1.5, at which point the legacy Ethereum blockchain is merged into Ethereum 2.
What happens to all the applications and data on Ethereum after the launch of Ethereum 2?
Over time, all the apps currently living on Ethereum will migrate over to Ethereum 2. No data or transaction records will be lost as a result of the move to Ethereum 2.
What is “staking” on Ethereum 2?
Staking on Ethereum 2 is the act of participating in the validation of blocks on the network by committing funds – staking them – and serving as a validator.
There are two ways to stake: become a validator, or join a staking pool.
- Validators: A validator on the Ethereum network runs computer software that confirms transactions on the web, adds them to the next block in the chain, and communicates between the shard and beacon chain. A minimum stake of 32 ETH is required to be a validator, along with software and some technical skills.
- Staking pools: If you have less than 32 ETH or do not wish to run a validator yourself, you can participate through a staking pool or staking service.
Is there an advantage to staking on Ethereum 2 from day one?
The benefit is to earn higher rewards (up to 21.6%) than will be offered later on. To learn more, read our article on Ethereum 2 Validator Economics.
How much ETH do I need to stake on Ethereum 2?
Staking as a validator on Ethereum 2 requires a minimum of 32 ETH. When staking through a staking pool or service, such as with Bitcoin Suisse, it is possible to stake and earn rewards with less than 32 ETH.
