For a long time, Bitcoin was the only crypto tender available to users who engaged in a time-consuming and energy-intensive mining process. At the time, applications were also limited. However, everything changed in 2015 when the Ethereum network exploded onto the scene. Its extravagant features provided numerous previously unseen opportunities.
However, due to Ethereum's Proof-of-Work nature, transaction processing was a matter of power consumption, which sparked outrage among climate change activists. With newer blockchains using a less energy-intensive Proof-of-Stake mechanism to process transactions, Ethereum faced competition, sparking the concept of Ethereum 2.0. While "The Merge," the starting point of Ethereum 2.0, is taking place, there is no better time to consider what it means for the Web3 space.
Introduction to Ethereum 2.0
Ethereum 2.0 is an enhanced version of the Ethereum blockchain. The transition from Proof-of-Work (POW) to Proof-of-Stake (POS) essentially means that the current network will be merged with another test network known as "Beacon Chain," which was developed by the Ethereum network's developers. That is why the process is known as "The Merge," and Ethereum's founder, Vitalik Buterin, has more plans to make the network the ideal spot in Web3. The upgrade to Ethereum 2.0 will also address issues that the Ethereum main network is currently experiencing, as we will see in a later section. The process is then followed by "Shard Chains," which will bring Ethereum 2.0 to a close.
Ethereum 2.0: The Stages of Development
Everything began with the Beacon Chain, a separate POS network launched by Ethereum's developers in December 2020. The blockchain has been working on preparing things for validators to stake, leaving out other notable features of Ethereum, such as smart contracts.
The Beacon chain will be merged with the Ethereum mainnet in September 2022, making Proof-of-Stake valid across the entire network. This results in what the community refers to as "Ethereum 2.0," which is formed by the Beacon chain absorbing the blocks of Ethereum.
The Merge will be completed by two fork events in the Ethereum mainnet. The first, Berlin Hard Fork, was held in April 2021. The following one, London Hard Fork, will alter the basis for gas fee charges. The modifications will be based on the EIP-1559 protocol, which will burn gas costs and provide miners with tips as an option.
The Altair Hard Fork will be the first Beacon chain fork to alter how rewards and penalties are distributed to validators.
Following the completion of all hard forks, the absorption process will begin in order to launch a new-face Ethereum network based on the POS mechanism.
Exciting News Following the Ethereum Merge
Vitalik Buterin mentions additional changes following the Merge that will result in the network progressing to the top of the Web3 world.
The Surge will generate shard chains, which will help to increase the network's scalability.
The Verge will simplify how users validate transactions by eliminating the need for user machines for storage, resulting in a more decentralised network.
The Purge will be similar in that it will attempt to reduce the need for user machines for data storage, thereby propelling Ethereum to maximum decentralisation.
The Splurge will be used for other activities that can take advantage of the network's efficiency to run feature-rich applications.
The Key Features of Ethereum 2.0
Scalability - Ethereum 2.0 will increase the number of transactions per second (TPS). This is critical because making users of decentralised applications wait for transaction processing defeats the purpose of decentralisation.
Security - While security has not been a major issue in the current Ethereum network, upgrades will only improve as the user base grows and malicious minds become more intelligent.
Sustainability - Because Ethereum 2.0 is based on the Proof-of-Stake (POS) model, energy consumption is lower than it was previously when using Proof-of-Work (POW). This could change the minds of Ethereum sceptics.
What Happens After Ethereum 2.0 Is Released?
The Merge marks the beginning of Ethereum 2.0, which will be followed by the other stages. However, the network's initial changes include an increase in transaction speeds, with higher TPS numbers becoming a reality. Furthermore, Ether holders can actively participate in passive income-generating opportunities that do not require hardcore computing power through staking. With the network's existing popularity for smart contracts, a large market share, and the second most sought-after cryptocurrency ($ETH), Ethereum 2.0 could be another step toward realising the ideal blockchain dreams.
The Effects of Ethereum 2.0 on Different User Ends
For the time being, Ethereum miners will have to migrate to other mining-based blockchains or become validators by staking Ether instead if they want to use their equipment.
End users, such as crypto and NFT holders, will notice a change in transaction efficiency and lower gas charges as the possibility of gas wars decreases as POS is used.
Business owners will experience similar changes, with less congestion bringing them joy because users will no longer complain to them about "sloppy transactions."
What Does This Mean for Me as a Business?
While there are numerous business opportunities available in the blockchain space, you can also choose blockchain development if you want to make a difference. Metawork is a reputable company that creates blockchains and related applications. We have been in the industry for over 7 years and have served numerous global clients along the way. Many of our client blockchain projects have grown into massively profitable businesses. Consider contacting our experts for a start if you want your venture to have the next Ethereum 2.0-like impact!