Ethereum is the second most popular crypto coin in the digital ecosystem that every individual is looking to invest in. The king cryptocurrency, Bitcoin, is still dominating the first position in every list. Although numerous blockchains are popping into the cryptosphere, all the projects have only been able to grab a small portion of the demand.
However, Ethereum is one digital asset that can challenge the king coin, although there isn’t any close competitor. According to data from CoinMarketCap, being a major competitor, Ether is the second-largest digital asset in terms of market capitalization.
Ether and Bitcoin are the two virtual assets with the most potential. Both the virtual currencies introduce different utilities to solve different real-world issues. But it is deemed that the Ether blockchain is a bit advanced compared to the flagship digital asset's. Yet, Ether has a few shortcomings because of some technological issues.
Following the scenario, the developers behind the millennial project introduced Ethereum 2.0. The developers hope to fix all the technological concerns with a new and much-hyped upgrade to revolutionize the digital economy.
Ethereum is built to cement Bitcoin’s limitations?
In 2008, the concept of Bitcoin as a Peer-to-Peer payments system was introduced by the pseudonymous Satoshi Nakamoto.
Later in 2009, the project was first established while considering the growing global concerns related to government-issued fiat currencies. Although the flagship cryptocurrencies network seems a bit outdated as it was introduced more than a decade ago, it is now solving several real-world issues. Still, the BTC blockchain has some significant limitations.
When it comes to processing transactions, the BTC blockchain is not very efficient in tackling large counts of transactions. In the current scenario, without the help of any sidechain like the Bitcoin Lightning Network, the BTC network processes only seven transactions per second.
On the other hand, the government-issued fiat currencies are processing about 24,000 transactions each second. Because of such an issue, people have to wait in the queue to get their transactions validated whenever the volume surges. Because of such network congestion, blockchain users also have to pay loftier fees.
Unlike the Ethereum blockchain, the Bitcoin blockchain does not allow smart contracts. Since the technology was established in its infancy, it only allows for basic programming. Network enhancement is truly significant to bring the ability to participate in new platforms and different investment opportunities.
BTC blockchain is transparent for anyone across the globe. Many in the cryptosphere claim that the BTC network lacks the privacy of its users. To scrutinize any person’s transactions, users need to know their public wallet address. Once the wallet address’ owner is identified, it is really easy to explore all of their transactions. Notably, identifying a wallet’s owner is not something hard.
What to expect from the coming Ethereum upgrade?
“In simple words, Ethereum 2.0 is an upgrade to the existing Ether blockchain that is set to revolutionize everything.”
Notably, the Ethereum network is currently facing an array of issues. Among all the problems, some major ones include sober power consumption during the mining process, insufficient transaction capacity, and scalability. The ETH2.0 aims to remove all of the issues while introducing a more fast and sustainable ecosystem that will allow the highest transaction count.
The blockchain developers are working to roll out the upgrade in several phases. Until today, the upgrade has already completed its three major phases.
The first step towards transforming the network was witnessed back in Late 2020. Later in the first quarter of this year, the transition saw another phase when the blockchain introduced “the merge”. Similar to the name of the phase, the Beacon Chain was merged into the Ether blockchain.
After witnessing these phases, now the community is waiting heartily for the last and final stage of the transition. In the concluding stage of the ETH2.0 upgrade, the existing network will launch Shard chains.
Why does Ethereum need Shard Chains?
Scalability is one of the biggest concerns on the ETH blockchain because the current infrastructure limits many of the network’s abilities in various fields. Hence, Vitalik Buterin, the co-founder of Ether, introduced the concept of shard chains that are going to play a major role in helping scale the network.
“In Ethereum 2.0, each “shard” is an individual chain that will be 64 of them initially. The shards will allow network load to spread, solving Ethereum network scalability issues.”
Today the Ethereum blockchain is running on a single chain, due to which the users face network congestion and high fees. The introduction of shard chains will distribute the entire processes on the current mainnet across 64 new chains while boosting the efficiency of processes. This will help to make everything faster. Moreover, these chains will also make it easy to run the Ether node on hardware, as there will only be less data to store.
The issuance of the ETH tokens will also be reduced by more than half, as sharding will enhance network participation. Currently, every year about 4.7 million new ETH coins are being introduced. Amid the upgrade, it is estimated that the issuance will be between 100k to 2 million only every year.
As we have witnessed in the case of Bitcoins, how scarcity boosts the prices, potentially ETH will also witness increasing demand. According to Vitalik Buterin, the co-founder of the Ethereum blockchain:
“One of the reasons we’re doing Proof of Stake is that we want to reduce the issuance greatly. So in the specs for ETH 2.0, I think we have calculated that the theoretical maximum issuance would be something like 2 million a year if literally, everyone participates.”
Differences that Ethereum 2.0 will bring
Ether blockchain’s current infrastructure is processing only thirty transactions every second. The developers have observed that the current chain was built on a single chain which is secure but not efficient. Although it is much better than the Bitcoin blockchain, the network needs to scale to compete with the government-issued fiat transactions.
However, with the upcoming upgrade, it is estimated that the blockchain will then process a whopping 100k transactions. Besides, the network is based on the Proof-of-Stake (PoS) mechanism to validate and secure the blockchain.
The PoW mechanism is an agonizing process where the cryptocurrency miners solve complex calculations, which helps identify and record new transactions.
Although the concept has been great since its establishment, it is later realized that the consensus mechanism consumes a huge amount of energy. On the other hand, The PoS mechanism uses validators to process transactions. The best thing about it is that any user can be a validator of transactions.
“With PoS, the Ethereum blockchain won’t need a high-specs machine to run and manage it. The other advantage is that this process is far more energy-efficient than the PoW mechanism.”
Validating transactions with the PoS consensus does not require any powerful hardware or a big amount of energy. Analogous to mining, PoS is a vastly more efficient and adequate consensus as even individuals with no technical background can partake in securing the network.
Besides, the aforementioned changes to the Ether network will also witness Docking. The new feature will help the current chain become one of the shards in the coming upgrade. Docking will ensure the entire transition of the second-largest blockchain to the PoS model, ending the PoW model.
Moreover, Docking will allow smart contracts to run on the upcoming model while providing the complete history of Ether as well as its current state. Docking is really significant for a smooth transition for the community.
More security and decentralization
These coming features are going to bring a more energy-efficient solution, enhanced security, more decentralization, enhanced pace, and everything for a reduced cost. Although today the world witnesses that cryptocurrency transactions are the most secure solution, PoS will ensure better security in the future. Notably, Ethereum 2.0 is going to need tens of thousands of validators to ensure such a level of security.
So many validators would help ensure a greater decentralization. Enhanced decentralization means a more secure network as comprising data would be almost impossible or extremely expensive. Simultaneously, sharding features will also enable users with no technical skills to participate in the network. This no-skill participation is going to attract more transaction validators that will ultimately bring more decentralization and democratization.
As sharding ensures the network does not rely on a single chain, the Ethereum upgrade is going to process more transactions for a lower cost.
The upgrade will help the decentralized global system
Following the aforementioned transition, Ether is going to move to the next level. According to some experts in the cryptosphere, Ethereum 2.0 will not only be able to compete with traditional government-issued fiat but also help revolutionize the way we see the digital ecosystem today.
The upcoming upgrade will give the blockchain a great edge over other cryptocurrencies and provide a competitive edge over traditional fiat transactions. With the elements and approaches Ethereum 2.0 promised to bring, it seems the blockchain network will have the ability to revolutionize the entire cryptosphere.
The decentralized global system of smart contracts will move forward with its vision of pace and reliability while reducing the carbon footprints and leveling the users and investors to have a democratic say in the future of the network. The scalability of the network will allow more users and ensure that innovations like smart contracts, dApps, and NFTs are growing.
Ultimately, the Ether upgrade will allow the helpful global decentralized infrastructure to grow more. Undoubtedly, the blockchain will attract the world, making it the service of choice.