Will ETH 2.0 Live Up To The Expectations?

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Is ETH 2.0 the magic wand that will wave all ETH problems away?

Photo by David McBee from Pexels

If you are active on Twitter, you will agree with me that ETH 2.0 is a trending hashtag, many people seem to think that ETH 2.0 will solve all the issues facing ETH 1.0.

Firstly, what is Ethereum?

Ethereum is a decentralized computing platform that uses ETH (also called Ether) to pay transaction fees or what is popularly known as gas fees. Developers can use Ethereum to run decentralized applications (dApps) and issue new crypto assets, known as Ethereum tokens. (source)

Now that we know what Ethereum is, what are the problems facing ETH 1.0 and why is there so much hype about 2.0?

The major issue with ETH 1.0 is the huge gas fees you have to pay for each transaction you make.

I remember sometime in May, I got the opportunity to mint a free Non-fungible token (NFT), I was super excited to claim my first NFT. Excitedly, I went to the NFT website, located the NFT I wanted, clicked on mint, and what I saw shocked me, I was to pay 100 dollars gas fee to claim the NFT, I didn’t have up to that in my wallet so I had to forfeit the opportunity.

With my experience above, now you can understand why everyone is super hyped about ETH 2.0

Now the question on your mind is will ETH 2.0 live up to the expectations?

To answer your question, there is no such thing as ETH 2.0.

ETH 2.0 is not a singular event rather it is a series of upgrades. EIP3675 is the name for the upcoming merge to Proof of Stake.

Wait, what?

Yes, you read that correctly. There is no such thing as ETH 2.0. What people are referring to is EIP3675 and Ethereum move from proof of work (PoW) to proof of stake (PoS).

Now you are confused, what is proof of work? What is proof of stake? And why is Ethereum moving?

Simply put, proof of work (PoW) is the original consensus algorithm in a blockchain network. The algorithm is used to confirm the transaction and create a new block to the chain while the Proof of Stake (PoS) concept states that a person can mine or validate block transactions according to how many coins they hold. (Source).

Ethereum’s move to proof of stake (PoS) could be attributed to the fact that it is seen as less risky in terms of the potential for miners to attack the network, as it structures compensation in a way that makes an attack less advantageous for the miner.

The moment of truth

The switch to proof of stake (PoS) isn’t supposed to fix gas prices. It is all about changing the consensus from PoW to PoS. Ethereum’s move to proof of stake (PoS) will have a very minimal impact on users or investors.

The next question that is probably on your mind is can Ethereum scale?

There are speculations online that Ethereum will dump when the upgrade is complete.

You should be aware that switching from proof of work (PoW) to proof of stake (PoS) has the consequence of distributing less ETH as staking rewards than miners previously received and when you combine this with high gas fees, it will almost certainly make ETH a deflationary asset. Stakeholders will gain access to their coins as a result of the merger, potentially causing a supply shock. Excess of supply could result in stakers clamoring for dumping.

Takeaway

EIP3675 is another important step on the journey rather than the final destination. Gas fees will only improve with the later roll-out of sharding. People need to understand that it isn’t just EIP3675 that will save everything or be a miracle. Rather the combination of EIP3675, sharding, and scaling solutions altogether. If this all comes together, I can see Ethereum remaining as one of the top blockchains over the next 3 to 7years. Given the large number of alts and services that rely on the ETH network, I have no reason to believe it will ever go away.

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Hope I succeeded in breaking down what Ethereum 2.0 is all about and the reasons behind Ethereum’s upgrade. If you found this article helpful, help add as many claps as possible below and share with your friends while leaving your thoughts below.

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Will ETH 2.0 Live Up To The Expectations? was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.