- Ethereum 1.0 will be changed to Ethereum 2.0
- The change is being implemented to tackle the issue of scalability, high gas fees and low transactional throughput.
- Changes that will be implemented include change in consensus mechanism, introducing sharding and fee structure change.
Ethereum is the second largest cryptocurrency by market capitalization second to Bitcoin. The Ethereum ecosystem has grown manifold since its inception and with the rapid growth came the issue of scalability. Ethereum work on a Proof-of-Work Consensus mechanism that limits its chances of capability and thus Ethereum is going under an upgrade to Ethereum 2.0 where various issues such as scalability and transactional delays will be countered and Ethereum will be made invincible or as it is thought to be.
The following changes to the Ethereum blockchain infrastructure will be made when migrating to Ethereum 2.0:
Change in Consensus Mechanism
The biggest change that ethereum will have in its new version is the complete migration of its infrastructure from the Proof-of-Work (PoW) Consensus Mechanism to the Proof-of-Stake (PoS) Consensus Mechanism. PoW is a high energy consuming algorithm as it requires solving mathematical puzzles for validation of the blockchain. The PoS is a more energy efficient mechanism that requires staking of the native token of the currency to validate the transactions on the blockchain. PoS will also provide for the increase in transaction throughput by allowing sharding.
Introduction of Sharding
With Ethereum 2.0, the concept of sharding will be introduced in the blockchain. Sharding is the concept of dividing the blockchain into sub-blockchains to increase the transactional throughput as the transactions can now run concurrently on the sub-blockchains. This will help in enhancing the scalability of the Ethereum network and at the same time increase the transaction speed. It will also help to divide the workload of the validators by assigning validators to individual shards.
Fee Structure Change and Token Burn
Another major change in Ethereum 2.0 which has already been implemented in the London Hard Fork is the change in the fees structure of Ethereum. The bid based fee system has been changed with a base fee and tip system which will help in reducing the high gas fees to an extent. Also, the base fee charged for each block will be burned making Ethereum a deflationary model. This will help in reducing the number of tokens in supply and in increasing the value of each token.
Ethereum 2.0 is expected to solve all the problems that are being faced by Ethereum and its users. Though these changes will not come abruptly and rather a step by step approach has been taken to introduce the changes in the phased manner. The Ethereum 2.0 is to be launched by the end of December 2021 if not delayed further.
Disclaimer: The article is just to provide information and shouldn’t be considered as any financial advice. It is advisable to conduct thorough research before investing in any cryptocurrency.
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