The launch of Ethereum 2.0 will introduce several big and small changes over the coming months and years. When everything is said and done, Eth2 will look very different from the current Ethereum.
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Three Big Changes Under the Hood
Most people who interface with the Ethereum ecosystem are unaware of the underpinning code. That is only to be expected, as using this technology requires very little technical knowledge. For developers, that situation is very different. They are always looking for new features and tools. Ethereum 2.0 will introduce some significant changes in that regard.
Proof-of-Stake Is Coming Soon
The first significant change taking place is the switch to proof-of-stake. Not only will this remove the reliance on miners securing the network, but it also promotes inclusivity. Everyone with a big enough Ethereum balance can help validate transactions on the network. Others can keep their ETH in a wallet and let it earn passive rewards over time.
The switch to proof-of-stake marks a key milestone for the Ethereum project. It affects the consensus mechanism to build blocks on the native blockchain. Although proof-of-stake will improve security, scalability, and efficiency, enthusiasts cannot take it lightly. According to Ethereum developers, this change is necessary. Enthusiasts will recall Ethereum’s code has a “mining difficulty bomb” that will make proof-of-work unsuitable.
Shard Chains Improve the Overall Throughput
The second crucial change introduced by Ethereum 2.0 is the deployment of shard chains. This solution addresses the scalability concerns associated with the current version of Ethereum. Improving the chain’s throughput is paramount. A single blockchain can’t handle high volumes of transactions or data transfers, which is why an alternative solution is needed.
By using shard chains, the network can process and validate transactions in parallel. Furthermore, shard chains “split” the Ethereum blockchain into smaller parts. This approach ensures every network node is responsible for processing a small piece of the data. One can compare it to adding more “traffic lanes” to the Ethereum network.
In theory, there is no limit to how many shard chains one can add to Ethereum 2.0. The technology introduces unprecedented scaling support, theoretically allowing Ethereum 2.0 to reach an astronomical throughput. More lanes result in more parallel processing power. Based on the roadmap, shard chains will roll out during Phase 1 of Ethereum 2.0
Culling the Ethereum Virtual Machine
Coders and developers interface with Ethereum through the EVM, or Ethereum Virtual Machine. This execution environment makes it easier to use smart contracts. With these smart contracts, Ethereum has gained success by facilitating Initial Coin offerings and decentralized finance projects, among other things.
When Ethereum 2.0 goes into effect, the EVM will retire. Instead, the eWASM solution will take its place. Through this web assembly language, it becomes possible to execute Ethereum application code in a web browser. Additionally, it introduces more flexibility regarding the coding language used to build projects and services on the Ethereum blockchain.
Doing so will allow for more developers and coders to become part of the Ethereum ecosystem. Opening the doors to existing coding enthusiasts without forcing them to learn a new programming language is a significant step forward. It remains unclear how beneficial this approach will be to the overall ecosystem.
A Change In ETH Issuance
Transitioning from proof-of-work to proof-of-stake will impact the issuance rate of Ether. Vitalik Buterin confirms there will be a maximum mission of 2 million ETH per year. However, the issuance can also drop to 100,000 Ether, depending on overall network circumstances.
The maximum annual issuance depends on how much ETH users are staking. A lower amount of combined staking balances results in a lower annual distribution. As a result, the yearly Eth2 inflation rate will range from 1.6% to 143.1%.
The current version of Ethereum has an emission of 13,076 ETH per day or a total of 4,772,740 Ether per year. Ethereum 2.0 will reduce this emission rate by more than half. How that will impact the use of ETH remains unclear. One has to keep in mind a part of the current circulating supply sits in the deposit contract. Stakers will lock up ETH as well, removing it from the circulating supply.
The Current Ethereum Chain Remains Active For Now
One intriguing aspect of the Ethereum 2.0 launch is how two networks will need to work together. More specifically, the current Ethereum blockchain will work in tandem with the Eth2 ecosystem. Interested users can transfer their assets from the existing blockchain to the new network, although it is not required.
Until the Ethereum 2.0 launch hits phase 1.5, this unilateral approach will remain in place. It ensures the network transition will occur smoothly. Following the switch, the network will transfer the coins to Eth2 automatically. Users do not have to undertake any action before this change taking place.
Are There Any Risks?
Whenever a significant technical change occurs, remaining cautious is smart. The Ethereum 2.0 launch is hugely complex and has many moving parts. Technology is unpredictable.
The most significant risk is facing delays in rolling out the next phase of the network. A lot of the code is still under development and review at this stage. For now, there is no hard deadline to activate different Phases of the Ethereum 2.0 rollout.