Ethereum has a rich history, which has seen both significant advances and setbacks. Notably, the network switched from the proof-of-work (PoW) model to the proof-of-stake (PoS) mechanism in mid-September 2022. This change is expected to result in a smaller energy footprint, increased scalability, and faster transaction times.
This evolution was dubbed “Ethereum 2.0,” a broad term that encompassed Ethereum’s progression into a more powerful and accessible network. The blockchain community regards this upgrade as a necessary and expected step in Ethereum’s ongoing development.
Definitions Of Ethereum & Ethereum 2.0
It is crucial to have a clear understanding of the fundamental definitions of each to distinguish between Ethereum and Ethereum 2.0.
The cutting-edge network leveraging blockchain technology in a decentralized manner. Its native cryptocurrency, Ether (ETH), is widely recognized. Ether is a token intended to fund blockchain support work, but it can also be utilized to pay for tangible products and services. The network’s versatility allows anyone to develop any secure digital technology.
Ethereum boasts scalability, programmability, security, and decentralization, making it the go-to blockchain for enterprise and developer-led technology solutions that are driving change in many industries and our daily lives.
Smart contracts are an essential feature of decentralized applications, and Ethereum natively supports them. Numerous decentralized finance (DeFi) applications rely on smart contracts and Ethereum technology.
The term “Ethereum 2.0” is commonly used to describe improvements made to the Ethereum blockchain in order to resolve its technical issues. However, it is not an official name recognized by the Ethereum developers. Instead, the Ethereum Foundation prefers to use “Ethereum” for the upgraded blockchain, while the consensus layer is called “ETH 2” and the execution layer is referred to as “ETH 1.”
The development of Ethereum 2.0 has been ongoing for several years before this upgrade was implemented. The official launch of the Beacon Chain in December 2020 was the first step in the upgrade process, allowing users to stake their Ether and participate in the network’s consensus and validation processes while receiving rewards in ETH.
Highlighting The Top 3 Differences
As the popularity of cryptocurrencies is on the rise, more attention is being paid to their underlying infrastructure. Ethereum, the second-largest cryptocurrency by market capitalization, has undergone a significant overhaul to become Ethereum 2.0. This upgrade promises to address some of the most pressing issues facing the network and enhance its scalability and security.
We will highlight the critical differences between Ethereum and Ethereum 2.0.
Modification Of The Consensus Mechanism
Following the shift from Proof of Work, which involved mining coins on the network with costly mining farms and equipment, to the Proof of Stake mechanism in the later part of last year, the Ethereum blockchain now randomly selects ETH holders to act as validators. This validator is then responsible for hashing the new block. To qualify as a validator, one must stake at least 32 ETH. Holders with lesser amounts who still wish to participate can team up with others in staking pools.
To safeguard the blockchain from fraud, any validator caught endorsing illegitimate transactions will face a deduction in their staked funds, a process known as slash. Not only is PoS a sustainable approach, but it also promotes a more decentralized blockchain compared to its predecessor. Users no longer need to invest in costly rigs, which opens the possibility for anyone with a certain amount of ETH to partake in mining new tokens.
Another significant improvement of Ethereum 2.0 over the classic Ethereum is sharding. Sharding is a standard programming technique in which data is distributed among multiple machines, leading to faster processing speed. In the case of Ethereum, 64 shards were introduced to distribute workload onto various databases. Each shard is a new chain connected to the old Ethereum chain to access previously recorded data. All shards work the same way as the old chain.
Sharding addresses Ethereum’s scalability issues. The classic Ethereum was only capable of handling 15 transactions each second, while Ethereum 2.0 can manage up to 100,000 transactions each second. To illustrate, imagine the old Ethereum blockchain as a busy highway with just one lane. But with the recent upgrade, 63 new lanes have been added, making the traffic flow faster.
In our earlier discussion, we learned about Ethereum 2.0’s division into 64 distinct chains and the process of selecting validators to add new data blocks to them. However, you may wonder how these chains are connected and how validators are chosen. The answer lies in the difference between ETH and ETH 2.0. All 64 chains are linked to a single blockchain called the Beacon Chain. This central component controls the entire network and facilitates transactions throughout the ecosystem.
An essential role of the Beacon Chain is to select and monitor the next validator randomly. In the event of any exploitative behavior, it is also responsible for deducting the staked amount. The random selection of validators ensures that the system remains free from bias toward specific participants. In short, the Beacon Chain acts as the brain of the entire Ethereum 2.0 network.
What Possible Changes Are Coming With Ethereum 2.0?
Proof-of-stake consumes significantly fewer resources than proof-of-work, resulting in faster transaction speeds and lower power consumption. Although the network presently processes 12 transactions per second as of March 2023, developers have assured an eventual capacity of 100,000 transactions per second by implementing updates, including Proto-Dnaksharding and Danksharding, which introduce distributed data sampling and potentially replace rollups with “blobs.”
Recently, Ethereum shifted to Proof of Stake (PoS) which is considered to be its most significant transformation. The Ethereum Foundation compared this change to upgrading a spaceship with a new engine and reinforcing the hull for interstellar travel.