Ethereum 2.0 Genesis block mined on December 1, 2020
The Ethereum network has existed since 2013 and has since gained the trust of users
Scaling will help the project grow and attract new supporters
International consortium of news organizations developing transparency standards.
On December 1, 2020, the long-awaited launch of the genesis block of the zero phase of the updated Ethereum 2.0 protocol – the Beacon chain network – took place. The crypto community has been anticipating this event for years. Why is it so inspiring for Ethereum bulls and why Eth2 is considered such a significant milestone in the development of the ecosystem?
Ethereum and its virtual machine
Throughout 2020, the Ethereum blockchain has consistently remained in the focus of attention of representatives of the crypto industry. The BeInCrypto editors have repeatedly talked this year about a whole list of fundamental factors that promise bullish prospects for the Ethereum blockchain, which celebrated its fifth anniversary in July..
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This was largely due to the fact that, unlike the vast majority of cryptocurrencies, Ethereum managed to clearly demonstrate that it is a completely independent financial ecosystem..
Indeed, an important advantage of Ethereum was that it was created not as another digital currency, but as a whole infrastructure built on the blockchain and using distributed ledger technology..
In addition to being able to send tokens within the network (for example, Ether), the blockchain can also execute codes and store information. In other words, it is a huge computer with a distributed database..
One use case for blockchain is smart contracts that store various types of digital information. Their codes are programmed to work when certain conditions are met. This eliminates the need to involve intermediaries in various transactions. This practice is now best used in the decentralized finance segment (DeFi) Decentralized finance (DeFi) is a blockchain-based financial service that offers users access to an open, efficient and … More).
The distributed ledger eliminates the possibility of fraud or falsification of the code of one of the parties, since each transaction is verified on many computers and information about it is simultaneously stored on the devices of a large number of users.
However, every medal has a flip side. In this case, this is the commission for the execution of the transaction, which in the Ethereum network is expressed in the form of gas and is charged in ETH tokens. Amid the boom in the DeFi industry and the rise in popularity of smart contracts, the cost of gas began to become prohibitive.
In some egregious cases, users had to pay thousands of dollars for a single transaction. Meanwhile, the network began to lack bandwidth – it is now about 35 transactions per second. The developers faced the problem of network scalability.
Ethereum co-founder Vitalik Buterin promised back in 2014 that a solution to the scalability problem and the consensus algorithm would be found..
How ETH 2.0 works
Ethereum currently uses a Proof-of-Work (Proof-of-Work) mining algorithm, however Eth2 will use Proof of Stake consensus. Algorithm known as Proof-of-Stake will improve network efficiency.
In other words, users will be able to deposit their Ethereum tokens to confirm blocks and receive a reward for it. This process is called “staking”. The developers hope that this approach will optimize the validation process and increase the speed of transaction processing on the Ethereum network..
A quick recap of the short and medium term of Ethereum scaling.
1. Ultra-high scaling with sharding + rollups will be possible * in phase 1 *
2. Sharding is NOT "canceled"
3. Get on a rollup asap; you get 100x scaling even without eth2 pic.twitter.com/fXW0Q3iAxu
– vitalik.eth (@VitalikButerin) October 5, 2020
However, the transition to a new consensus algorithm, far from all the innovations implemented in Eth2. The main innovation of the ecosystem will be the support of several blockchains, the so-called shadrs. This technology allows to increase the speed of transaction processing.
Ethereum is so much more than a crypto. The projects are cool but the people you meet are even better.
This is what competitors don’t realize. A large, passionate community on top of an already functioning platform is extremely difficult to disrupt.
– Eric Conner (@econoar) November 14, 2018
The ETH network is huge and all validators need to be up to date and confirm transactions. Sharding simplifies the process by creating sidechains that contain only a fraction of the history of transactions on the Ethereum network. Thanks to shards, EVM will process not tens, but thousands of transactions per second.
ETH2 scaling for data will be available * before * ETH2 scaling for general computation. This implies that rollups will be the dominant scaling paradigm for at least a couple of years: first ~ 2-3k TPS with eth1 as data layer, then ~ 100k TPS with eth2 (phase 1). Adjust accordingly.
– vitalik.eth (@VitalikButerin) June 30, 2020
The Shadrams need to interact with each other, for that they need the ETH 2 parent blockchain This is the Beacon Chain launched today with such fanfare.
Ethereum 2.0 Chart Source: &vert: Hsiao-Wei Wang
Another way to scale Eth2 is to use roll-ups. It is a second-tier solution that allows some transactions to be processed on other blockchains to speed up the process and free up space. In short, the rollup technology will collect several transactions and “roll” them into one.
In addition, Ethereum is still a decentralized project. All improvements were submitted for public comment and reviewed by the community.
Was looking at the proposal for eth2 to move to 64 shards over the weekend.
-128kb block target (512kb block cap)
-1kb per tx with witness data
-12 second slot (block) times
-682 to 2,730 tps range
This is before applying any ZK or L2 tech.https: //t.co/GEJOOrAVwL
– Eric Conner (@econoar) December 9, 2019
Beacon for chains
The Beacon chain genesis block was mined on December 1, 2020. This is the first real block outside of testnets and the first step towards implementing Eth2.
The beacon chain will provide security, control shards and ensure that all chains communicate with each other. If two pieces of code in different shards need to interact with each other, they will do this through the Beacon chain.
However, it takes time for the Beacon chain to form a consensus. Shards will appear soon, but the transition of Ethereum to a full version of Etherum 2.0 with PoS support may take years.
ETH2 deposit contract released: https: //t.co/bDrtf9vRpJ
– vitalik.eth (@VitalikButerin) November 4, 2020
As with many testnets built for Eth2, developers want to ensure that all system components are running smoothly and securely. After all, billions of dollars are at stake.
Vitalik Buterin opened a deposit contract for Eth2 on November 4, 2020. ETH holders were allowed to post coins for future staking. To launch the project, it was required to collect 524.288 ETH (more than $ 300 million at the current exchange rate). Threshold was reached on November 24, 2020.
Those who contributed their coins can count on a profit (about 20% per annum), but it will take more than one year to wait. In fact, they froze their capital and lost access to it until the transition to ETH 2.0 was completed. To take part in staking, you need to deposit at least 32 tokens (more than $ 19 thousand).
According to Trustnodes, Vitalik Buterin contributed 3,200 ETH to the project. That’s over $ 1.9 million.
Not all members of the crypto community support the idea of upgrading Ethereum. The logic is simple: why extend the life of an obsolete blockchain when there are other more advanced platforms for smart contracts??
To begin with, Eth has a rich history behind it. It has a stronger community that has proven its commitment to the ideal of decentralization. Nobody, not even Buterin, can single-handedly make or cancel a decision. Moreover, no one has yet managed to crack the EVM code, despite the massive use of blockchain and its technologies..
See the blue part?
Those are the insider coins retail will never access until they’re dumped on you. Might as well add the pink part too, since most treasuries are "on-chain governance" insider controlled anyway.
The Ethereum killers are toothless.
Distribution is everything. pic.twitter.com/HP1QkMj9U3
– Ryan Sean Adams – rsa.eth (@RyanSAdams) October 27, 2020
Perhaps in the future there will be platforms that can replicate the functionality of ETH. This year, the PolkaDot (DOT) project attracted hundreds of millions of dollars in investments (its creators previously worked on Ethereum); Cardano (ADA), which has yet to launch the mainnet, promises to bring many of the features available on Eth2.
The founder of everything
The notorious crypto-cats became the first experience of real use of digital tokens. They appeared in 2017, and then no one knew where all this would lead. Meanwhile, it was the seals who provoked the first serious congestion on the Ethereum network and exposed the problem with speed and scalability. The most expensive digital kitten named Dragon was sold for 600 ETH on September 4, 2018. Since then, the era of non-fungible tokens has begun.
Then came AAVE (formerly lend), Compound Finance and yEarn.finance. These decentralized financial platforms are just a small part of the army of projects using smart contracts and working like a bank without a bank. This is how lending platforms appeared that do not require the participation of third parties and bring insane interest..
After a while, users came up with profitable farmingCryptocurrencies, as an alternative financial instrument, open up additional earning opportunities for users. Decentralized finance (DeFi) market participants decided to take advantage of this feature …. More: token holders moved funds from one protocol to another, accumulated loans and earned huge interest (on Curve and yEearn, some received 400% per annum). Soon, profitable farming spread to other blockchains, for example, Binance Chain..
Uniswap is starting to become unusable with gas prices at 200+ gwei. The only reason people are still using it is that they think they will outperform the fees from flipping tokens (probably true). But if retail actually comes, Uniswap won’t be usable for anyone but whales pic.twitter.com/2Ce01sKasO
– Larry Cermak (@lawmaster) August 12, 2020
DeFi’s success has created problems: gas prices have risen sharply and scammers have proliferated. Millions of dollars have been stolen from hacker attacks and fraud.
Meanwhile, automated market makers led by Uniswap used smart contracts to make the token exchange process fully decentralized. If earlier the creators of the token had to pay huge fees for listing on the exchange, now anyone who wants to, and at least superficially familiar with the basics of programming, could register it in the protocol and help out millions of dollars on the sale..
This scheme gave rise to the fashion for liquidity mining. Users were rewarded for providing liquidity to automated market makers. Often, such miners wandered from platform to platform in search of more attractive conditions, overloading the Ethereum network.
Non-fungible tokens (NFT) fashion came after DeFi and Uniswap.
EVM features allow proof of ownership of a digital art object, even though it is easy to reproduce. The success of NFT has led to the fashion for “tokenizing everything.” According to this theory, all assets, be it art or real estate, can be sold and fixed as a token with proof of ownership on the blockchain..
In addition to company stocks and tokens, this technology can be applied to transactions and real estate.
When the passions subside
Having spawned new industries (or perhaps quirks), Ethereum has become a really expensive blockchain to use. The crisis reached its climax when Uniswap sent out 400 UNI tokens worth $ 1200 to all users. Everyone rushed to cash it, and transaction fees skyrocketed.
Gas bills increased especially in September / October 2020 | Source: yCharts
Since then, gas has dropped a little. Still, transactions on ETH are much slower and more expensive than on other blockchains, but it is still popular. Moreover, users are already accustomed to ETH, and the entire infrastructure built within this ecosystem continues to exist and develop..
Year of Ether
Bitcoin can be used in many ways: as cash, gold, collateral, or a store of value. But it was Ethereum and its smart contracts that really caught the imagination of users. Competitors are on the alert, but Ethereum still looks like the virtual machine of the future.
If the speed and scalability of Ethereum 2.0 truly lives up to expectations, it will outgrow Eth1’s problems. More importantly, the flexibility of the developers means that Ethereum will be able to adapt to any changes in the future..
Bitcoin – 223% Profit. Ethereum 2.0 to be launched soon. The first US crypto bank. Cryptonews
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