Perhaps you hold some Ethereum and heard about Ethereum 2.0 and wondering what’s going to happen to the Ethereum you hold? Also, what Ethereum 2.0 will do differently than the regular version?
Ethereum 2.0 is an upgrade to Ethereum and will introduce staking, sharding and eWASM. When the upgrade is complete they will be the same. The controversy is if you stake Ethereum you have to leave it on the experimental chain and you can’t remove it until it’s complete.
Keep reading and I’ll share how proof of stake is different than proof of work. I’ll share what sharding will bring and what eWASM is. Lastly, I’ll share how you can earn money with this change and 1 controversy with it.
What Happens to Ethereum?
Ethereum is going through an upgrade! This upgrade includes multiple steps and will take years to complete.
Step 1: The first step is the Beacon chain that went live on December 1, 2020. This chain will run parallel to the Ethereum blockchain.
The only thing you can do on this Beacon chain is stake Ethereum on it so you can become a validator.
Step 2: Introduces sharding.
Step 3: Brings the Beacon chain into the Ethereum 2.0 blockchain as its own shard.
Step 4: The entire update should be complete.
It’s estimated that the full completion of Ethereum 2.0 will happen sometime in 2022, but nobody knows for sure.
With your Ethereum you have 2 choices.
- Stake the Ethereum and become a validator.
- Do nothing and your Ethereum will automatically be converted to Ethereum 2.0.
Proof of Work vs. Proof of Stake
Perhaps one of the largest changes from the upgrade is Ethereum 2.0 will have proof of stake. In theory proof of stake is going to be more scalable and introduce reduced transaction fees and faster transactions.
With a blockchain, MANY people have to agree that a block is accurate and this is called consensus. Every person who agrees on it has to have SOME skin in the game.
Without skin in the game, it’s easy for someone to lie because they have “nothing” to lose. Bitcoin started with proof of work because Bitcoin wasn’t worth anything when it was started.
You can’t stake Bitcoin if they are worth “nothing.”
Since time is money, proof of work made sense. With proof of work, someone’s computer had to solve a complicated puzzle and if they solved it then they would get to add the block to the blockchain and get the Bitcoins.
All the nodes HAVE to agree that the block is correct and if it’s NOT, say someone produces a faulty set of transactions on the blockchain it forks into 2, and ALL the computer continues to build on the longest chain.
To prevent 1 supercomputer from creating blocks and lying on who gets what money, Bitcoin increases its difficulty based on how much computing power is attached to the network.
It’s TOO difficult and expensive for 1 person to take over the network and lie about where the money goes. There is a theory that proof of work was originally created to fight email spam.
Proof of stake does the same thing except your locking up crypto. If someone tries to break the rules some of the cryptos they staked will be lost (they have skin in the game).
Without skin in the game from staking money or spending time “there would be NOTHING to lose from trying to cheat.”
There is a debate on the environmental impact of them both. Inflation is usually higher for proof of stake, oh and there are coins usually minted and given out before launch with proof of stake.
Oh, and MOST cryptocurrencies don’t have slashing enabled because investors don’t like the idea that their stake will be reduced.
There are also other security concerns with proof of stake such as nodes can store the blockchain in the cloud of Amazon for example.
With a blockchain, every node has to store the entire blockchain. They also have to help process all the transactions. This is very secure, but do you see a problem?
Yea, it’s slow!
It’s similar to 10 people trying to figure out a complex math program. Sharding is similar to each person hiring 10 other people and each person figures out a part of the math program.
Do you see how this is faster?
With sharding, the blockchain data is split into pieces and each node works with 1 piece. Nodes can process different transactions in parallel.
Instead of you trying to eat an entire pizza you only have to eat 1 slice each day!
The security is handled because nodes are grouped together to form the blockchain. There are a few of these groups so if 1 node disappears another group has the blockchain.
Yes, it’s complicated and more things can go wrong (which is why I like Bitcoin because it’s simple).
The benefit of sharding is SPEED. More transactions can take place faster and more people can use the blockchain without waiting.
What is eWASM?
On Ethereum 1.0 the system that helps put smart contracts on the blockchain is EVM (Ethereum Virtual Machine). eWASM is the same thing, but just better, faster, and will be in Ethereum 2.0
It’s important for this programing language to be faster to help with scale and to serve MORE people with Ethereum.
This link HERE is the EASIEST article I have found that explains the differences and what they do (it’s still confusing).
Why Become a Validator?
One way you can earn money with this whole update to Ethereum 2.0 is to become a validator. The problem is you first have to move your Ethereum 1.0 to the Beacon chain.
Considering how complicated Ethereum is and this is “brand new” locking your Ethereum upon an experimental blockchain “is risky.“
Now, if you fully believe in Ethereum, then maybe you want to lock up some Ethereum and never think about it.
Another negative with staking Ethereum is you have to be a validator and operate a node. This ALL requires hardware, electricity, maintenance, and MOST importantly time.
OH, and let’s not forget you need 32 Ether to be a validator. At the time of this blog post that is around $125,000. You just want to check 5 times at least that you do EVERY step right so you don’t LOSE your $125,000.
Losing $125,000 sure would suck “BIG TIME.”
The good news is there is a way to join a pool if you don’t have 32 Ether and you can learn more about these pools by clicking on the link HERE.
Being a validator does take time and if you’re offline you could get penalized. You probably want a backup energy source and backup internet connection.
You also probably want a good second computer that is just for being a validator.
To learn how to be a validator on Ethereum you can click on this link HERE.
Ethereum is a controversial cryptocurrency due to it being Turing complete. Turing complete is a program that can run and never stop basically it’s complicated and MORE things can go wrong.
Many DEFI projects are on Ethereum, but I know of one that is built off Bitcoin. What I like about Bitcoin is it’s simple, will fewer things that can go wrong.
In this DEFI project, you can earn “really” good money and I would feel guilty if I didn’t share it. You can learn more about this DEFI project by clicking on the link HERE.
I hope this blog post on is Ethereum and Ethereum 2.0 the same was helpful to you. Bye for now.