Ethereum is one of the most prominent blockchains alongside Bitcoin. The decentralized and open-source blockchain went live in 2015. But after close to a decade, an upgraded version, Ethereum 2.0 (ETH 2.0), also called Serenity, became necessary.
Ethereum 2.0 seeks to enhance Ethereum’s transaction capacity, security and efficiency, reduce fees and increase the network's sustainability. Let us go ahead and talk about Ethereum and Ethereum 2.0 in greater detail.
What is Ethereum?
Ethereum is a blockchain or technology that enables you to send digital assets to anyone at a small fee. It is a decentralized and open-source blockchain: decentralized because participants can run transactions in a self-sustaining system without permission from the government or traditional intermediaries.
Also, being an open-source blockchain implies that Ethereum permits its users to use, study, modify and distribute its source code without restriction. That means capable users or contributors can participate online as a collaborative network in its development process.
Similarly, its open-source feature further explains why it’s called the world’s programmable blockchain. Ethereum came to the scene to make some improvements to the Bitcoin network. And although both networks allow you to transact with digital currencies without banks or payment providers, Ethereum's programmable feature gives it the edge.
The result is that you can use it for a more comprehensive array of digital assets. Besides, it’s a marketplace for decentralized applications, financial services and a host of other services that protect your privacy and transaction security.
What is Ethereum 2.0?
Ethereum 2.0 is a general name for a series of upgrades for the Ethereum network. The reason for these upgrades is to enhance the network’s scalability, security and sustainability. Currently, different professional teams on the Ethereum network are building those upgrades.
The Ethereum 2.0 upgrade features a transition from Ethereum’s original Proof-of-Work (PoW) consensus protocol to Proof-of-Stake (PoS) consensus protocol. But, why the shift from proof-of-work to proof-of-stake. Let’s find out!
Why is Ethereum Transitioning from Proof-of-Work to Proof-of-Stake?
Ethereum originally used a proof-of-work consensus mechanism. However, the Ethereum 2.0 upgrade has introduced the proof-of-stake consensus mechanism. In proof-of-work, miners use powerful computers to solve random and complex math problems to approve, secure and record blockchain transactions.
However, it consumes a large amount of fossil fuel—implying a massive increase in Ethereum's carbon footprint. Minimizing Ethereum's carbon footprint through PoS is a worthy cause. Many crypto platforms root for carbon-neutral transactions.
An example is Popcorn—a carbon-neutral crypto savings platform. Popcorn lets you earn high returns on your crypto investment while funding worthy environmental, educational and open-source causes.
To this end, Popcorn has built strategic partnerships with eco-friendly brands to enable it to offer top-notch DeFi services to end users and organizations without contributing to the climatic challenges that PoW blockchains pose.
Again, PoW blockchains battle decreasing efficiency and Scalability. And all these disadvantages justify Ethereum's transition to proof-of-stake. In proof-of-stake, there are no miners, just validators.
PoS operates a more decentralized transaction validation system through a process called Staking. You stake your crypto by investing it for transaction validation in a proof-of-stake blockchain like Ethereum. You also earn Ethereum rewards for staking your ETH coins.
Interestingly, PoS validation creates a highly secure, scalable and efficient validation system that's open to participants on the blockchain. As a participant, you can vote for or against major transaction decisions—your vote's weight depending on the amount of crypto staked.
That said, let's look at some of the things Ethereum 2.0 upgrade seeks to improve in the Ethereum network.
As Ethereum's user base grows, it has become imperative to speed up its throughput. The idea is that a greater processing capacity will counter a more significant number of transactions.
The scalability problem is not just limited to the Ethereum network. Even Bitcoin, the grandfather of blockchains, faced the same challenge, which led to a more scalable derivative called Bitcoin Cash.
At about 10-30 transactions per second, Ethereum is yet no match for Visa, which can handle 1,500+ transactions per second.
However, the upgrade to ETH 2.0 seeks to launch Ethereum into the realm of thousands of transactions per second so that applications can be faster and cheaper. That implies that Ethereum gas fees will drop too.
Security is imperative in this advanced tech era, especially as hackers and other infiltrators grow their skills to compromise just any network. A successful attack on Ethereum would be one of the biggest losses of the century.
More so, it will be a big blow to the network's security system. As more users adopt Ethereum, it becomes a potential target for attack. The network has to be more secure than ever, and that’s part of what the Ethereum 2.0 upgrade will address.
Cryptocurrency mining and transaction processing have contributed considerably to humanity's carbon footprint. Ethereum and Bitcoin mining operations consume more energy than the Thai population of about 90 million people, according to the Ethereum Energy Consumption Index from Digiconomost.
Ethereum 2.0 comes to replace the PoW (proof-of-work) with the PoS (proof-of-stake) consensus mechanism, which means there would be no need for mining on the network. According to Vitalik Buterin, Ethereum's co-founder, Ethereum's sustainability vision is to diminish the network’s energy consumption by a factor of above 1,000 using PoS.
Scalability, security and sustainability are some of the most significant concerns of today's biggest blockchain platforms. With its ETH 2.0 upgrades, the Ethereum network stands up to the grueling drawbacks. Hopefully, we should see a more scalable, secure and sustainable Ethereum before 2023.
Without a doubt, we expect projects like Popcorn to dominate the center stage due to the carbon-neutral ecosystem it’s building. That way, we get more from DeFi generally, without harming the environment or paying heavy energy costs.