Ethereum 2.0

Ethereum 2.0

Ethereum is a decentralized, open source blockchain platform that enables the creation and execution of smart contracts, decentralized apps (dApps), and a host of other technologies. After Bitcoin, Ethereum is probably the most well known cryptocurrency, and unlike Bitcoin the Ethereum network offers a far broader range of possibilities. The Ethereum cryptocurrency is also the most valued and widely used cryptocurrency after Bitcoin.

Ethereum has been around for many years, and has been evolving in many ways. Most recently, Ethereum has been upgraded to Ethereum 2.0. Ethereum 2.0 is a long awaited upgrade to the Ethereum network that aims to address many issues currently facing the blockchain. A few areas that Ethereum 2.0 hopes to improve are scalability, security and energy efficiency.

Proof of Stake

One of the most significant changes proposed in Ethereum 2.0 is the move from a proof of work (PoW) mechanism to a proof of stake (PoS) consensus mechanism. This change will both increase the scalability of the network and reduce the negative environmental impact caused by the energy intensive PoW. The increase in scalability will occur by allowing a far greater number of transactions to be processed per second.

Proof of work and proof of stake are two different mechanisms that are used to validate transactions and create new blocks on the blockchain. There are advantages and disadvantages to using either consensus mechanism.

Here are a few benefits and drawbacks to proof of stake:

Benefits of PoS over PoW:

  • Energy efficiency: One of the primary benefits of PoS is how much more energy efficient of a mechanism it is. In proof of work, miners compete to solve highly complex mathematical computations, whereas in proof of stake, validators are chosen based on the amount of stake they have locked up in the network. This requires a significantly less amount of energy consumption.
  • Increased scalability: Proof of stake allows for a far larger number of transactions per second as compared to proof of work. This is due to the validation process of proof of stake to be overall faster and require less computational power — and thus less energy.
  • Reduced risk of centralization: Another advantage is that proof of stake minimized the risk of centralization, something that many in the crypto space are wary about. In proof of work, the miners who can afford the best equipment will inevitably mine the most crypto, but in proof of stake anyone can become a validator so long as they have sufficient stake locked up in the network. This will lead to more decentralization in the long run.
  • Better incentives: Proof of stake users are incentives to stake their assets, or lock them up in the network and participate in the validation process. This helps to create an alignment of interest between users, and the network and its security.


Drawbacks of PoS over PoW:

  • Complexity: Proof of stake systems can be more complicated and complex than proof of work systems, due to the mechanism of selecting validators and the process of creating new blocks being generally more complex than in the traditional proof of work.
  • Vulnerabilities: While both systems are vulnerable to hacks or other types of attacks, proof of stake systems can be more vulnerable to certain types of attacks, for example, “nothing at stake” attacks, where validators can validate multiple chains at the same time.
  • Lack of maturity: Because proof of stake is newer than proof of work it is inherently less mature and there is still ongoing research into its benefits and drawbacks.

Ethereum 2.0 is set to be a game changer, and carries many upgrades that users have long waited for. Due to the changes being so significant, only time will show us how Ethereum 2.0 is in fact an improvement from its predecessor.

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Jeff Sekinger

Jeff Sekinger Founder & CEO, 0 Percent Who is Jeff Sekinger? Visionary Trailblazer Sekinger has been in the financial industry for over a decade. Starting

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