With only nine hours to spare, Etheruem’s deposit contract reached the threshold needed to launch — a figure of ETH524,288. These deposits guarantee the coming of the ETH 2.0 genesis blockchain.
Cointelegraph says: “Despite early concerns stemming from low staking participation, transfers to the deposit contract rapidly increased over the past day, with more than 200,000 ETH sent to the contract in the past 14 hours.”
What is ETH 2.0?
ETH 2.0, also known as ‘Serenity’ is a major network update that addresses Ethereum’s issues with scalability and security. It also means that its blockchain is moving to a proof of stake (POS) consensus mechanism for a proof of work (POW) one.
What’s the difference between POS and POW?
With any blockchain, there is a need for the decentralized validation of transactions. Ethereum, like other cryptocurrencies, currently uses a consensus mechanism known as proof of work (PoW).
In this system, miners use computer hardware processing power to solve complex mathematical puzzles and verify new transactions. The first miner to solve a puzzle adds a new transaction to the record of all transactions that make up the blockchain. They are then rewarded with cryptocurrency. However, this process uses huge amounts of expensive electricity.
Proof of stake (PoS) is different, because instead of miners, transaction validators stake crypto for the right to verify a transaction. These validators are selected to propose a block, and this is based on how much crypto they hold, and how long they’ve held it for.
Other validators can then confirm that they have seen a block. When there are enough confirmations, a block can be added to the blockchain. Validators are, of course, rewarded for the successful block proposition. This process is known as “forging” or “minting”.
The main advantage of PoS is that it is far more energy-efficient than PoW, as it decouples energy-intensive computer processing from the consensus algorithm.
The advantages of ETH 2.0 for DeFi
The difference will also be seen in the speed of ETH transactions. ETH 1.0 is only able to support 30 transactions per second, whereas ETH 2.0 should be able to achieve 100,000 transactions per second. This improves ETH’s utility, especially as the Ethereum blockchain is the basis of DeFI projects, one of the hottest trends in fintech right now. This is going to be one of the most significant stories in 2021, as ETH 2.0 is rolled out in various phases through the coming year. As Decrypt says: “Phase 2, slotted to launch in 2021/22, will see shards becoming fully-functional and compatible with smart contracts. It also involves adding Ether accounts and enabling transfers and withdrawals, implementing cross-shard transfers, and contract calls. It will build execution environments for scalable apps that are built on top of Ethereum 2.0.”
This is something we’ve all been waiting for!