Last Updated:
March 21, 2022

What Is Ethereum 2.0?

What Is Ethereum 2.0?

What Is Ethereum 2.0?

The long-awaited Ethereum 2.0 has arrived after a five-year wait. The crypto community warmly greeted the new network's debut in December 2020, and ETH is now back to its all-time high. But what exactly is Ethereum 2.0, and why is it important?

In 2015, Ethereum was a huge success. Vitalik Buterin and his team exposed the blockchain industry to a novel smart contract ecosystem, which quickly grew into its universe within the crypto market.

Every developer wanted to create a decentralized application on Ethereum, and the only method to do so was through token sales and crowdfunding. Initial Coin Offerings (ICOs) sparked an investment frenzy that propelled cryptocurrency to unprecedented heights practically overnight.

Cryptocurrency veterans have had a great time throughout this time. In 2015, though, they recognised that Ethereum had a long way to go before realizing its full potential. A blockchain dedicated to smart contracts and decentralized applications (dApps) can only service so many users before hitting a bottleneck that hinders future growth.

The Ethereum Foundation declared that they want to switch from Proof of Work to Proof of Stake to get around this constraint. The latest network upgrade revolutionizes how nodes validate blocks while boosting scalability to new heights.

We are convinced that Ethereum 2.0 will be the next major thing after Bitcoin. As a result, we produced an article that covers all you need to know about this next-generation Proof-of-Stake blockchain network.

What is Ethereum 2.0, and how does it work?

You're already familiar with Ethereum, but what about Ethereum 2.0? Although the technical specifics are complex, the new network's aim is apparent.

Proof-of-Stake, an agreement mechanism in which nodes validate transactions and blocks by staking tokens, is the foundation of Ethereum 2.0. Anyone can join the network and operate a node in this situation by depositing and locking 32 ETH.

Each node has a chance of being chosen by the network, giving it the ability to propose a block. While the procedure is less randomized than Proof of Work, people who have a more significant number of assets have a better chance of winning. If the node completes the task, it wins money for proposing and verifying the block.

Developers have spent years figuring out how to put Proof of Stake into practice. The Ethereum team was notorious for creating and scraping roadmaps frequently, earning them a terrible image that they currently bear.

Things changed for the better in 2019 when the Ethereum Foundation finally uncovered a viable solution. They had to consider how to construct Ethereum 2.0 and launch the new network without destroying the existing one.

Before we go into Ethereum 2.0, let's clear up a popular misconception.

Does Ethereum scale with Proof of Stake?

The majority of people in the community assume that Proof of Stake is the only reason Ethereum 2.0 is faster than Ethereum 1.0, yet this is not the case.

Sharding is the crucial technology that scales blockchain networks, while PoS provides a favorable environment for a quicker blockchain network. What exactly does Proof of Stake perform, and how does it benefit Ethereum?

Efficiencies in energy

Sunny King and Scott Nadal, two technologists and Bitcoin enthusiasts, came up with the Proof of Stake concept because they thought PoW was too expensive and inefficient.

Miners only spent $150,000 per year on power consumption at the time. However, King and Nadal were well aware that the figure would skyrocket in the future. PoS has been offered by the two as a solution to the problem affecting blockchains.

PoW miners validate blocks by decoding complex mathematical problems, as we already know. To tackle these difficulties and maximize their chances of obtaining a block reward, miners need powerful computers.

Miners need both quality and quantity to enhance their mining farms.

On the one hand, high-end computer hardware consumes more energy. To be competitive, the miner, on the other hand, needs numerous such rigs. What was the result? A node with a strong desire for power. What's more, guess what? Each year, the complexity of mining blockchains increases, requiring more energy for initiatives like Bitcoin.

In this aspect, PoS is straightforward because it solves the problem. You must stake virtual tokens and do nothing else to validate blocks. Because staking is not a power-hungry process, the node does not require any particular computer gear.

Although nodes are limited to 32 ETH, this isn't always bad. By bringing together many nodes, a blockchain strengthens its security. Sustainability is maintained since Ethereum 2.0 focuses on the number of nodes rather than their size.


Mining blocks with their computer hardware is how PoW nodes make money. Miners must run their farms in a precise environment that meets numerous conditions to mine at a respectable level. Examine the following to see if mining is profitable in your country:


Miners must set up mining farms in areas with low electricity costs. Russia, Ukraine, China, Iran, Pakistan, and other Eastern European countries are notable instances. Outside of these countries, miners make much less money and, in some cases, do not even break even.


Mining farms for professionals take up much room. If a miner wants to acquire a large farm, he will have to rent the land for thousands of dollars (if not more). Another disadvantage is that the activity is limited to individuals who live in typically distant, low-rent areas.


Do you reside in a country where mining is prohibited or heavily regulated? Are you paying any taxes because you make money from mining? Good luck! If you cannot relocate, you are in a bad situation and will likely not be lucrative for a long time.

Proof of Work is not the most excellent solution, as we can see. It has solid restrictions and is only available to a restricted number of people. Apart from being incorrect, the problem raises whether PoW is even decentralized.

Yes, anyone can access the network. However, because of the increased difficulty of mining, not everyone can become a miner. Many people argue that this alone eliminates one of the most important features of blockchain networks: decentralization.

This is a non-existent problem for Ethereum 2.0 stakeholders, as you can see. Everyone can stake it as long as they have the funds to hold 32 ETH, regardless of where they live.

What is sharding?

Now that we've covered how PoS helps let's look at sharding and how it affects Ethereum 2.0 scaling.

Sharding is a scaling solution that divides a blockchain network into several shards. Instead of authorizing one block at a time, the blockchain may now review and validate many blocks of transactions.

Ethereum 2.0 will transfer validators from one shard to the next to prevent tampering. Furthermore, Ethereum uses the well-known beacon chain to coordinate blocks and manage shard communication.

According to Buterin, sharding will result in a network performance of 100,000 transactions per second on average. Users will have to wait months until Ethereum Phase 1 implements sharding.

Ethereum's security will improve as shards increase the number of nodes processing data on a network. The team's primary idea is that having more nodes rather than increasing node sizes is a superior option.

After the sharding upgrade, Ethereum 2.0 will have 64 blockchain networks. It's unclear whether shards will also run programming (smart contracts).

Here's why Ethereum 2.0 didn't go live right away.

Throughout the last few years, developers have devised several ideas to coordinate the conversion of Ethereum to Ethereum 2.0. It had become evident that the original blockchain's size was a serious problem by the time they were ready to start actively working on the PoS network.

When you have much power, you also have much duty! How do you move the second-largest blockchain without causing a market-wide disruption? Making a sound and safe decision as the central hub for practically all of the industry's smart contracts and dApps was not easy.

The Ethereum Foundation realized in 2020 that there is only one viable option: rollups.

The fundamental goal is to roll out Ethereum 2.0 in stages while ETH1 continues to function normally. Both networks will continue to work side by side until Ethereum 2.0 is ready to launch.

Ethereum 2.0's Roadmap

We still have a long way to go before saying goodbye to ETH1 and hello to ETH2. While Ethereum developers do not have a set plan for when each phase will debut, we know what these phases will do.

Phase 0

Ethereum 2.0's Phase 0 was released in December 2020. A deposit contract that went live a month ago raised 524,288 ETH, which was enough to fund the project's initial stage.

Why 524,288 Ether in particular? Given that each node must stake 32 ETH, the total number of nodes is 16,384. This is the number of validators required, according to the creators, to keep Ethereum 2.0 decentralized and secure.

The Beacon is an essential portion of the network that coordinates and controls the Ethereum 2.0 blockchain and stores the data of each validator. This is the same entity that owns shards, as previously stated.

Apart from being the start of Ethereum 2.0, Phase 0 is hardly unique. The network cannot host decentralized applications (dApps), execute smart contracts, or process transactions. It's just a hub that enables the Ethereum Foundation to send out future improvements carefully.

Phase 1

The start of Phase 1 has not been declared as of this writing. Most people believe Ethereum will enter the next phase in Q2 2021.

Developers want to implement the sharding technology at this time. Ethereum 2.0 will be split into 64 shards or distinct chains. They will scale the entire network and run in an interoperable manner.

Developers should also decide how to execute smart contracts by that time. What is the most likely outcome? Leave it to the shards to complete the assignment. The Ethereum Foundation, on the other hand, claims that the community is still debating the issue and that other possibilities are being considered.

Phase 1.5

With Ethereum's developers, nothing is ever certain. Between Phase 1 and Phase 2, the team indicated the (unconfirmed) possibility of adding another stage. Ethereum 1 would combine with the PoS network and become a blockchain shard during this step.

Essentially, such a move allows Ethereum to continue to exist without ever halting or going offline. Without a break in continuity, all of the data from the old network would be effortlessly transferred to Ethereum 2.0. This improvement is dubbed "the docking" by the team, and it is expected to take place around 2021 or 2022.

It's also worth noting that the docking will not compel ETH holders to exchange their tokens for a new cryptocurrency. Despite migrating to a unique setting, Ether will remain the same.

Phase 1.5, on the other hand, seems unlikely to take place. According to the community, Ethereum is expected to join Ethereum 2.0 during the final phase.

Phase 2

The further we go into Ethereum's future, the less apparent it becomes. Sharding should be implemented in Ethereum 2.0 by Phase 2, and ETH1 should be docked into ETH2. During this phase, we expect developers to add smart contract capabilities finally. The most recent version should be completely functioning and include all Ethereum 1's basic features.

Is this, however, the final update for Ethereum 2.0? Not in the least. Phase 2 concludes with the launch of a new smart contract and dApp ecosystem. The Ethereum Foundation continues to work on improving and adding new features to the new blockchain network.


After Bitcoin, Ethereum 2.0 is the second most important thing in the blockchain business. The new Proof-of-Stake network offers unprecedented scalability compared to any other significant blockchain network. For years, cryptocurrency enthusiasts have awaited this moment, and in 2021, we will be nearer than ever to the final takeoff of Ethereum 2.0.

Will it be worth the wait? According to experts, a network capable of supporting up to 100,000 transactions per second will cause the entire industry to explode. People from all walks of life will begin to join the revolution once they see that blockchain platforms are faster and cheaper than banks.

Ethereum 2.0 and decentralized finance (DeFi) will slowly but steadily achieve what Bitcoin did in the previous decade. Will you be there to see the full brilliance of the second wave of blockchain evolution?

Photo by Nenad Novaković on Unsplash