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Definition: Ethereum 2.0

A dramatic change to the Ethereum blockchain that started in late 2020. Dubbed "Serenity," Ethereum 2.0 (Eth2) was designed to be far more secure, environmentally conscious and highly scalable from originally only a few dozen transactions per second to tens of thousands. Eth2 uses the Casper proof-of-stake (PoS) consensus mechanism instead of proof-of-work (PoW), which has been used by both Ethereum 1.0 and Bitcoin since their inception. Proof-of-work uses a tremendous amount of electricity to mine new coins, but Ethereum 2.0 will eventually cut that by 98%. Transaction fees (gas fees) are designed to be considerably lower as well.

Locking Up (Staking) Ether to Participate
Entities that want to mine Ethereum 2.0 become Ethereum "validators" and must lock up 32 ether for the privilege. This can be a single user or a "staking pool" that combines ether from a group of people. For greater participation, additional validator nodes, each staking 32 ETH, can be set up. In addition, a third-party "staking-as-a-service" enables anyone with 32 ETH, but without technical knowledge, to have an Eth2 node run on their behalf.

Not Everyone Is Thrilled
Many people who have dedicated their own computers or who are in Ethereum 1.0 mining pools are not happy about the change to 2.0. With Ethereum 1.0 proof-of-work, computers with high-speed graphics processing units (GPUs) are able to win rewards. However, locking up 32 ETH to become a proof-of-stake validator is not viable for many of those participants.

The Upgrade Path
December 2020 was the implementation of the "Beacon chain" using the Casper consensus method. In October 2021, enhancements were added with the Altair upgrade. Starting in 2022, Beacon merged into the network and stakeholders began adding blocks. However, the original proof-of-work network will continue running for some time.

Eventually, up to 64 additional blockchains, known as "shards," will be created, and the Beacon blockchain will manage them. In time, greater node anonymity and more randomness in selecting the node that adds the block to the blockchain are expected. See Ethereum and proof-of-work algorithm.

Buterin's Ethereum 2.0 Phases
Apparently, Ethereum inventor Vitalik Buterin likes rhymes because he announced the following phases as Ethereum moves to proof-of-stake. There are several stages in each of the following phases, and it is likely to take a few years to fully realize all the benefits from switching to Eth2.


 Merge   Merge with Beacon Chain

 Surge   Divide the network (sharding)

 Verge   Switch digest method (see Verkle tree).

 Purge   Lessen chain size

 Splurge Future enhancements