ETH2.0 is one of the most talked-about topics this year. No wonder, it is to be, after all, the new release of the second most popular cryptocurrency after Bitcoin. The undisputed leader when it comes to platforms for building decentralised applications based on smart contracts.
Other networks already provide throughput for thousands of transactions. Why is it so difficult for Ethereum?
Let’s start with what the blockchain is all about. What made Bitcoin, and then other networks based on this technology, deliver a value that didn’t exist before?
That value is freedom. The total openness and independence of the network. One that is resistant to any form of control or manipulation.
This means that on Bitcoin, Ethereum and some other cryptocurrencies we can do whatever we want. No one can control us or prohibit us from doing anything. And our funds are truly ours.
No corporation, no bank, no state is able to lay a hand on the funds we hold on the blockchain. A public, decentralized blockchain. To get the cryptos a mining os like simplemining.net is necessary. Please be sure you can handle it safely!
Decentralization is the key feature that makes Bitcoin or Ethereum what they are. An independent, alternative system where everyone is a captain to themselves, the ship, the vessel, and the fish.
Lose decentralization and we lose everything. We will get a system that could, for all intents and purposes, be replaced by PayPal or Amazon’s internet infrastructure. Under the control of corporations and governments. We will then be left with nothing.
What is this ETH2.0 then?
It is a new blockchain network based on a new architecture. It is based on a consensus mechanism known as Proof of Stake. In short, it consists in the fact that in the validation of new blocks can participate anyone who freezes a certain amount of coins.
In our case, it will be 32 ETH. If you perform the validation correctly (as most networks do), then as a reward you receive newly created coins. However, if you fail to perform the validation or perform it incorrectly (try to make a scam), then you will be punished by taking away part of the amount frozen by you.
The second foundation of the ETH2.0 architecture is sharding. In simple terms, it means splitting the blockchain into pieces. In the current version of Ethereum, we have the entire blockchain in one piece. This means that each participant of the network must both store all the data gathered so far and execute all the transactions made on the network.
If we had a network processing a thousand transactions per second, then each computer validating that network would have to process that a thousand transactions per second. Which would require a really robust machine.
Or actually a server farm. Which would put it beyond the reach of not only the average Joe Doe but also most small to mid-sized crypto entities. On top of that, such an amount of transactions means a huge amount of data. Which firstly needs to be quickly and efficiently distributed across the network during the validation process.
Secondly, they also need to be stored afterwards. Which is once again a technological and economic challenge for network participants. Many guys ask about the mining software usage for the development of ETH2.0. It is not clear still the rules beyond, but you can be sure it will recover your GPU…
This means that a limited number of users will participate in the process of validation and maintenance of the network. Which makes it easier for the few who do, to get along and take control of the network. Breaking its open, censorship-resistant, decentralized nature.