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Three things you should know about Ethereum 2.0 and its upward trend

August 5, 2020

Ethereum is moving to a new network, Ethereum 2.0 or Serenity. In essence, this change is a series of updates designed to make Ethereum faster and more secure in an environment where cryptocurrency hacking is common. Most of these updates are minimal, but there are also some significant changes to the behavior of this blockchain. In this sense, From cryptocurrency broker Coinmotion, they told Cointelegraph in Spanish an analysis of three points that they think is important to understand.

Raúl López, Country Manager of Coinmotion Spain, said:

“The two most important aspects of Ethereum 2.0 compared to Ethereum 1.0 are how new blocks are broken down and how blockchain transactions behave. These are intended to solve problems with high energy consumption in mining and scalability. “

The company found that the ETH options market continually hit new highs in trading activity at the beginning of the second quarter. As a result, ETH’s upward trend has intensified in a short time. In addition, all of these updates largely explain the 50% rise in the price of Ether last month, just as it’s celebrating its fifth anniversary, and as Ethereum 2.0 approaches, the price of Ether could rise. more ”, they emphasized.

Three things you should know about Ethereum 2.0 and its upward trendThree things you should know about Ethereum 2.0 and its upward trend

In this context, these are the three points to consider:

1- Evidence of use vs. Proof of work:

One of the biggest changes in Ethereum 2.0 is the validation of the proof of stake (PoS). Previously, like all other successful blockchain projects, Ethereum had been executed with proof of work (PoW) validation that has proven to be safe, especially with a large number of miners on the network.

However, it poses its own problems. PoW is resource intensive and also requires a lot of computing power. This in turn means that miners have to sell part of their cryptocurrencies to pay for new mining equipment, utility bills, etc.

Proof of participation is an alternative to proof of work. In PoS, mining power is based on the coins you own. The more coins the miner has, the more power he will have. For example, if a miner owns 1% of the cryptocurrencies, he can only mine 1% of the blocks. The ETH 2.0 is secured by the users by using at least 32 ETH to execute a validation node.

“This means that those with more ethers can mine more cryptocurrencies of this type. This results in a scenario where richer miners get richer while poorer miners get poorer. However, since proof of stake has never been seen with a blockchain application with high Status and a large user base as Ethereum has been tested remains to be seen what problems will arise when transferring to PoS mining, ”they emphasized by the cryptocurrency broker.

2- Solutions for scalability:

One of the biggest problems with Bitcoin and other blockchain solutions was scalability. The demand for transactions has grown much faster than blockchain solutions have been able to grow, expand and adapt to new technologies. The goal of Ethereum 2.0 is to change this and therefor In this update, three solutions to improve mining have been developed: Plasma, Raiden and Sharding.

Plasma is an additional layer built on top of the Ethereum blockchain This can be used for transactions without having to record every transaction. Actors can transfer ether to each other and only final credit is checked via the blockchain.

Raiden is another solution for off-chain transactions. Like plasma, it is based on trust between the parties, i. H. If Party X has 20 ether verified by blockchain and X is trusted by party Y, they can transfer these ether between them without having to rely on blockchain.

The third scalability solution is called sharding or shard chains. In this case, the behavior of the Ethereum blockchain changes. In Ethereum 1.0, all transactions take place in a single chain, which consists of successive blocks. With Shard Chains, the entire system is divided into different chains or sequences that are distributed in a single chain. In this way, transactions can be executed simultaneously in different blocks, which in turn enables a much larger number of transactions than before. Taken together, it is believed that these three solutions (and other minor updates) make Ethereum 2.0 much faster than its predecessor.

3- phases of Ethereum 2.0:

Ethereum 2.0 is to be gradually introduced in three different phases between 2020 and 2022. The first phase, phase 0, involves the creation of the so-called “beacon chain”. Beacon Chain is a second blockchain that uses proof of deployment validation. The original Ethereum 1.0 blockchain is also running to ensure that no data is lost or continuity is broken. This is the stage Ethereum 2.0 is currently in.

The second phase is to be implemented in 2021. In this phase, the blockchain is divided into shard chains. The Ethereum 2.0 blockchain is divided into 64 different shards. These parallel chains allow for more transactions, information storage, etc. Although it is currently believed that the blockchain is divided into 64 different fragment chains, the maximum number of fragments is much higher.

The third phase will begin in late 2021 or early 2022 if everything goes according to plan. The main part of this phase is to merge the Ethereum 1.0 blockchain into Ethereum 2.0 and finally disable the validation of the proof of work.

Pressure?

Ethereum has recently been under increased pressure due to the increasing spending of stable coins and the DeFi boom. However, If all goes well, the new Ethereum is much faster and safer than the previous version. This could be an advantage for the ether markets and ultimately mean that Ethereum could fulfill its promise as an intelligent contract system in the future. It could also pave the way for other features that have been pointed out since the beginning of the Ethereum project, with no apparent use.

About Coinmotion

Coinmotion is a cryptocurrency broker from the Finnish group Prasos Oy, which was founded in 2012 and has eight years of experience in the secure storage of cryptocurrencies. It operates under the brands Coinmotion, Bittiraha.fi, Demarium.com and Bittimaatti. Officially registered as a cryptocurrency operator and licensed by FIN-FSA as a means of payment.

It offers its services in countries of the European Economic Area (EEA). The group has more than 80,000 customers and a specialized team in the areas of cryptocurrencies, blockchain technology, information security, business development, investment services, compliance and more than 20 years of experience in the financial sector.

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