Ethereum 2.0 What to expect as an Ethereum 1.0 HODLer
Of late the high gas price had nothing to do with filling your petrol tank and everything to do with congestion on the Ethereum network, fueled by the massive shift from the BTC HODL movement to the DeFi space.
If; perchance you have been without WIFI for the past six months to a year — the next financial revolution is here and it is called: decentralized finance (DeFi).
Within the crypto space, scalability issues, network bandwidth impacting network speed and fees and importance of decentralization is always at the front end of conversations.
In 2017 it was those exact concerns relating to transactions per second which brought about the famous Bitcoin Cash Hard fork. The Bitcoin Cash tribe (BCH) increased the block size from 1MB to 8MB, increasing the transactions per block, resulting in faster transaction times and lower fees.
Being a Bitcoin purist, I feel at this stage focus should return back to the Ether conversation and BCH left for an entire thesis of its own.
We have also seen the environmentally conscious community objecting to the high power usage of the BTC Proof of Work network.
In the following paragraphs I will set out the steps to reach Ethereum 2.0 as well as the positive upgrade for the Ethereum community as a result.
A multitude of applications, ERC20 tokens and smart contracts operate on the Ethereum network and in peak times of transactions we see a spike in fees, a congestion on the network and with that naturally concerns for the stability of the “stretched” network.
Ethereum 2.0 will not be a new coin as result of a hard fork.
Since August 4th 2020 the deployment of a public testnet involving over 30 000 validators with more than 946 000 staked Ether called the Medalla testnet has been underway.
On November the 24th the threshold of Ether staked to launch the Ethereum phase 0 — Beacon Chain was met.
On January 17th a total of 2 537 698 Ether had been staked and the numbers of active validators were 63125. It is a true show of trust from the Ether community ensuring that the road map to Ethereum 2.0 launch is running according to plan.
Phase 1 requires 262 144 validators and is expected to launch in the latter part of 2021.
The above is also clearly indicating that the Ethereum 1.0 network runs parallel to the Ethereum 2.0 upgrade and will at the end of the third phase merge to create the new Ethereum 2.0 Proof of Stake network. The merge will happen without Ethereum 1.0 holders being aware of it.
The estimated timeline for this is two to three years. Estimated being the operative word here. Bugs popping up during these shifts are a most natural and expected occurrence.
If you would like to participate in this revolutionary upgrade to the Ethereum network, staking is at your disposal.
You need to stake 32 Ethereum to become a validator and the staking is a one way operation. Your Ether will be set in staking till the launch of Ethereum 2.0. As a result you will not have access to those coins. It is also not possible to simply send your Ether directly to be staked.
You need to go through the: https://launchpad.ethereum.org/ and follow the steps on how to become a validator and secure eth2.
If you do not have 32 Ether and would still like to participate, then going via a centralized exchange such as Binance or Coinbase might be an option as they do offer Eth2 staking rewards. Other options are to look at projects such as: RoocketPool, Lido Finance, LiquidStake and Cream Finance
A passive income in Ethereum is generated while your coins are staked, but penalties, also in Ethereum, will be deducted in the case of any down time or mismanagement of the node. Once your balance falls below 16 Ether, you will automatically be kicked out of the validator set. Ethereum “lost” due to penalties needs to be topped up. Staking is a complicated and technical process.
More information on Ethereum staking is available at:
The Ethereum 2.0 upgrade will happen in three phases:
1. Serenity Phase 0: Beacon Chain test
Provides Casper FFG Proof of stake and random numbers.
It is the first open to public testnet any of the five clients;
Prysmatic Labs’Prysm, ChainSafe’s Lodestar, PegaSys’Teku, Status’ Nimbus and Sigma Prime’s Lighthouse
can connect to the network and communicate directly with each other. Opening the path to decentralization, which will have its full expression once the Executive engine Serenity Phase 2 is concluded.
2. Serenity Phase 1: Shard Chain
The Ethereum network will be divided into 64 “shards” which will all operate at the same time and as such increase the transaction bandwidth to increase the speed of transactions and subsequently lower the network fees.
3. Serenity Phase 2: Execution engine
Ethereum will move from a Proof of Work to Proof of Stake consensus creating a decentralized network.
The move from POW to POS will remove the concept of “mining” for Ethereum and at the launch of Ethereum 2.0 your miner will be obsolete.
When we get closer to the launch of Ethereum 2.0 it will be useful to remember this bit of information as to not fall for the inevitable Ether mining rig sales which are sure to show their nasty heads.
A final note to make with regards to the upgrade is the deflationary quality which will be added to the new protocol. We have definitely seen the impact of the staked Ether in the recent price rise and in addition, on Glassnode, we can see many Ether being taken off exchanges. Greyscale, in addition, has just announced the reopening of their Ethereum trust to investors.
Could I dare to say we are seeing Ethereum becoming to Bitcoin what Silver became to Gold. With the combination of the phenomenal increase in transactional possibilities Ethereum 2.0 will offer in the future with the additional store of value in the deflationary and decentralized character locked in Eth2, CoinMarketCap might just replace the Netflix subscription.