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What Is Ethereum 2.0 and Why Is It Important?

Ethereum, a blockchain platform with its own money, Ether (ETH), is one of the most widely known applications of blockchain technology. Ethereum is known for its use in decentralized finance for smart contracts and DApps. It is currently the second biggest cryptocurrency in terms of value and the world's largest general-purpose blockchain.

Although the Ethereum blockchain has many uses and advantages, it is not perfect, and an upgrade has been in talks for a while now.

What is Ethereum 2.0?

Ethereum 2.0, commonly known as Eth2 or Serenity, is the first major update to the Ethereum blockchain. It aims to raise the Ethereum network's speed, efficiency, and scalability to handle more transactions while simultaneously increasing security and sustainability.

The main aim of Ethereum 2.0 is to transition Ethereum's consensus method from proof of work (PoW) to proof of stake (PoS).

How Will Ethereum 2.0 Be Implemented?

Due to Ethereum 2.0's launch being a massive process, it is expected to be in phases. Each phase introduces additional features and improvements, eventually leading to Ethereum becoming a proof-of-stake network.

Ethereum's first phase, called Beacon Chain, launched in December 2020. The Beacon Chain is the network's coordination mechanism that underpins the whole of the new Ethereum 2.0 system. The Beacon Chain's primary job is to administer the proof-of-stake protocol and all of its shard chains. It is also in charge of producing new blocks, ensuring their validity, and compensating reviewers with ETH for securing the network.

The Beacon Chain is already up and running. In the next phase of Ethereum 2.0's launch, the Ethereum mainnet will be merged with the Beacon Chain, bringing the network's PoW to an end.

After the first and second phase comes building shard chains, which will increase Ethereum's data capacity, resulting in a quicker, more scalable network. Shard chains will distribute Ethereum 2.0's network evenly across 64 shards rather than centralizing all processes on a single blockchain.

What’s the Difference Between Ethereum and Ethereum 2.0?

The major differences between Ethereum and Ethereum 2.0 stem from the transition from the popular proof-of-work (PoW) mechanism to a proof-of-stake (PoS) mechanism.

With PoS, miners in PoW are replaced by validators. Validators, like miners, validate transactions to ensure the network is not processing fake ones. This validation operation is referred to as forging.

PoW's mining process involves miners solving complex mathematical problems and validating new transactions with the aid of computers used for mining. The first miner to solve the proof is rewarded with the native token of the blockchain network. With Ethereum, miners are rewarded with Ether.

PoS's forging process with Ethereum 2.0 is a very different process. Validators are allowed to stake Ether and propose a block based on the amount of crypto they have staked and the duration of their stake. For this block to be added to the blockchain, other validators have to certify that they saw a block. When sufficient attestations are received, the block can then be added to the blockchain.

Why Is Ethereum 2.0 Important?

Because Ethereum 2.0 is an update to Ethereum's existing network, some upgrades and faster operations are expected to come in.

Energy Efficiency

The PoS mechanism employed in Ethereum 2.0 is expected to reduce the amount of computing power used for block creation in PoW. PoW's mining process is very energy-consuming because it employs computer miners that consume a lot of energy. According to the Ethereum Foundation, Ethereum 2.0 will use 99.95 percent less energy than the current Ethereum network.


Another main advantage Ethereum 2.0 has over its predecessor is the ability of its computing process to take on and complete more transactions faster.

The transaction rate is expected to increase exponentially with shard chains distributing the network load over 64 shards. Ethereum 2.0 predicts a transaction rate of up to 100,000 per second, a massive increase from 30 transactions per second supported by the current network. Therefore, Ethereum 2.0 is expected to help solve Ethereum's scalability problem.

Lower Gas Fees

As a result of PoS's increased energy efficiency, the number of transactions will increase. This prompts ETH to change its fee structure, which means users will pay a lower transaction fee.

More DeFi projects in the future

The upgrades and increased speed of Ethereum 2.0 are expected to enable the implementation of more complicated and affordable smart contracts, which undoubtedly will result in more Defi projects.


Ethereum's upgrade and introduction of the proof-of-stake mechanism is expected to increase the efficiency, security, and scalability of the blockchain network, which will benefit existing users and miners while also attracting more users at the same time. Ethereum 2.0 is certainly something to look out for.

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