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Nothing lasts forever. Bitcoin, while the first of its kind, has slowly begun to show its age. Scalability and speed issues will likely remain major problems for the Bitcoin blockchain. But maybe not for Bitcoin’s ambitious younger sibling, Ethereum, who is upgrading itself in a bid to depose the head of the family. Enter Ethereum 2.0.
Many alternatives to Bitcoin have emerged, and some have worked to address the problems of the Bitcoin blockchain. Nevertheless, most have not managed to capture a significant share of the market. Ethereum is the only one out of the bunch that has managed to somewhat compete with the boss. It trails only Bitcoin in market capitalization. Granted, the distance between the two technologies is considerable.
In fact, while an improvement on Bitcoin, the original form of Ethereum suffered issues of its own. Familiar ones, such as a lack of scalability. The Ethereum blockchain famously experienced severe congestion due to its users playing CyptoKitties, a decentralized version of Tamagotchi. Clearly, its creators had not made enough of an improvement on Bitcoin to convince faithful to change sides.
Through Ethereum 2.0, however, they seek to achieve dominance over a market that might underpin our potentially cryptocosomic future. A future where our personal information and property truly remains private.
How does Ethereum 2.0 improve on the original iteration, and does it stand a good chance of toppling Bitcoin? Let’s try and answer those questions in this article.
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The ETH 2.0 Roadmap
The developers are releasing Ethereum 2.0 in three main phases:
- Phase 0: Introducing the Beacon Chain
- Phase 1: Integrating shard chains
- Phase 2: ‘Docking,’ or merging the Mainnet (ETH 1.0) with the Beacon Chain (ETH 2.0)
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Phase 0: Introducing the ETH 2.0 Beacon Chain
The beacon chain establishes two key components of Ethereum 2.0:
- It stores and manages the registry of validators (i.e. blockchain participants who can propose and attest blocks)
- Implement the Proof-of-Stake consensus mechanism
As you can see from the roadmap above, the Beacon Chain remains separate from the ETH 1.0 Proof-of-Work blockchain during Phase 0. The Beacon Chain launched on December 1, 2020.
Proof-of-Work (PoW) vs Proof-of-Stake (PoS)
The main difference between Ethereum 1.0 and Ethereum 2.0 lies in their respective ‘consensus mechanism’ (i.e. how activities get validated and recorded).
Both Bitcoin and Ethereum (as well as other early blockchain implementations) cannot, for example, process transactions anywhere near the speeds of legacy transaction methods. This is a result of ‘Proof-of-Work,’ its consensus mechanism.
Proof-of-Work requires a great deal of processing power. Computers participating on a blockchain (a.k.a. ‘miners’) essentially compete against each other to produce cryptographic hashes that are complex enough to meet the network’s standards. The computer that generates a sufficient cryptographic hash earns its owner some cryptocurrency.
Coindesk explains the mechanism as follows: “The goal of the miners is to create a hash matching Bitcoin’s current “target.” They must create a hash with enough zeroes in front. The probability of getting several zeros in a row is very low. But miners across the world are making trillions of such computations a second, so it takes them about 10 minutes on average to hit this target.”
The problem with proof of work is that it’s terribly inefficient, and that’s by design.
Ethereum 2.0, instead, uses a consensus mechanism known as Proof-of-Stake to make its blockchain.
In a PoS system, node owners ‘stake’ their claim on a block using 32 ETH. The more currency the node owner has, the greater the chances of selection by the algorithm.
Once selected, the block receives ‘attestation’ (approval) from validators. When an adequate number of validators have attested a block, it gets deployed to the blockchain. Validators receive crypto for getting a block successfully deployed (a.k.a. “forging” or “minting”)
By using a selection process rather than one involving open competition, Ethereum 2.0 can significantly decrease the complexity of generating a cryptographic hash. According to a Decrypt article, “The main advantage of PoS is that it is far more energy-efficient than PoW, as it decouples energy-intensive computer processing from the consensus algorithm. It also means that you don’t need a lot of computing power to secure the blockchain.”
Phase 1: Integrating Shard Chains
In Ethereum 1.0, all data deployed to its blockchain has to receive verification from every single node on the network. The processing speed of the entire system, therefore, gets limited by the weakest (i.e. slowest) link. This increases transaction costs and decreases the throughput.
The sharding process is the way Ethereum 2.0 attempts to fix this bottleneck. Sharding refers to dividing a database horizontally in order to distribute the processing load.
The Zero Theft Movement does not have any interest in partisan politics/competition or attacking/defending one side. We seek to eradicate theft from the U.S economy. In other words, how the wealthy and powerful rig the system to steal money from us, the everyday citizen. We need to collectively fight against crony capitalism in order for us to all profit from an ethical economy.
Terms like ‘steal,’ ‘theft,’ and ‘crime’ will frequently appear throughout the article. Zero Theft will NOT adhere strictly to the legal definitions of these terms (since congress sells out). We have broadly and openly defined terms like ‘steal’ and ‘theft’ to refer to the rigged economy and other debated unethical acts that can cause citizens to lose out on money they deserve to keep.