Ethereum 2.0 : A new paradigm

Currently the second biggest market capitalization behind Bitcoin, Ethereum is one of the hottest projects of this year with Chainlink thanks to the boom of the DeFi sector.
In this sense, the launch, earlier this month, of the final development phase of the Ethereum project aiming to solve its well known scalability issues is a massive news and could very well be the first step toward mainstream adoption for the DeFi ecosystem and companies such as Synthetix.

But why do we need this upgrade ?

Back in 2015, due to the complexity of the development of a Proof of Stake (PoS) network compared to a Proof a Work (PoW) network, the team behind the Ethereum project decided to first create a PoW network and then transitioned to a PoS network. This decision was made in order to focus at first on the development of the Ethereum ecosystem to create a native language called Solidity allowing developers to create smart contracts and also prepare the network to their activation and execution on the main net.
However, now that the ecosystem is up and running and that developers are actively building the decentralized ecosystem on the Ethereum blockchain it is crucial to make the transition from the current PoW network to the PoS network in order to solve the current scalability issue of the Ethereum blockchain (see the CriptoKitties incident) and allow the mainstream adoption of the project.

How will it be done ?

Due to the complexity of re-launching a new version of the Ethereum network, Ethereum 2.0 will be released in three several phases with a planned duration of 6 to 8 months each.

Phase 0 : Beacon Chain launch

In this first phase, launch earlier this month, the team will first work toward activating the ethereum’s new PoS system called Casper in order to replace the existing PoW network. To this end, 16,384 validator** positions will be created and offered for sale on the network against a buy-in of 32 ETH.
Furthermore, this primary version of Ethereum 2.0 will launch without the ability to send transactions, store user data or deploy smart contracts to solely focus on coordinating validators and monitoring their work to secure the backbone of the system also called the “beacon chain”.

Phase 1 : The sharding process 

On the contrary of the current Ethereum blockchain, in Ethereum 2.0 rather than validating all transactions through a single blockchain with limited throughput, the network will instead be split between 64 blockchains each with their own set of randomly selected validators and able to process and create new blocks. In this sense, the current launch of the “beacon chain” in Phase 0 is crucial given that as the center of the Ethereum 2.0 network it will act as a bridge between all shards and save all the shard data in one central blockchain. 

Phase 1.5 / 2 : Dapps Deployment

Up until phase 1.5, Ethereum 2.0 will remain a separate network from Ethereum.  In other words, transfers of ETH made from Ethereum to Ethereum 2.0 will not be reversible and Dapps built in one environment will not exist in the other.
However, once we will reach phase 1.5 a bridge will first be created to seamlessly merge the two blockchain environments in order to then enable users in phase 2.0 to store and deploy new smart contracts data on any of the shards in the Ethereum 2.0 network once communication between all 64 shards and the beacon chain will be fully operational. 

Phase 3 : Finishing touches

This phase is still under development and is still not defined clearly by the team at the moment as it covers all the other elements that may be needed by the new network down the line such as additional shards for the networks or new cryptographic technology such as Zero Knowledge Scalable Transparent Arguments of Knowledge in order to increase the privacy of the Ethereum 2.0 network.

Impact of this upgrade on the foreseeable future

The first and most important impact of this new upgrade will be its impact on the scalability of the Ethereum network. Indeed, through the sharding and the new possibility to create smart contracts in any programming language, Ethereum will be finally able to attract more developers and fully embrace the DeFi opportunities that are emerging today across the crypto sphere. Moreover, through the development of new cryptographic technologies on a robust and efficient network, Ethereum 2.0 will definitely be in the race to become one of the key platforms for data management in the decade to come and as such open new pathways for the crypto sphere towards mainstream adoption.