In no time, the current Ethereum Mainnet will merge with the Beacon Chain proof-of-stake system. This will be the end of proof-of-work for Ethereum and the full transition to proof-of-stake. This will be Ethereum 2.0 – the most upgraded version.
Proof-of-work is the mechanism that allows the decentralized Ethereum network to come to a consensus or agree on things like account balances and the order of transactions. This prevents users from “double spending” their coins and ensures that the Ethereum chain is tremendously difficult to attack or manipulate.
Ethereum transactions are processed into blocks. Each block has a block difficulty, mixHash, and nonce. The proof-of-work(PoW) protocol, Ethash, requires miners to go through an intense race of trial and error to find the nonce for a block. Only blocks with a valid nonce can be added to the chain. The objective of proof-of-work is to extend the chain. The longest chain is the most credible as the valid one because it’s had the most computational work done. Here lies the reason why POW requires a lot of computing power that, in turn, raises cost and energy consumption.
Ethereum is moving off proof-of-work to proof-of-stake (PoS) because it is more secure, less energy-intensive, and better for implementing new scaling solutions. The Merge represents the combining the existing execution layer of Ethereum with its new proof-of-stake consensus layer – the Beacon Chain. The Merge will reduce Ethereum’s energy consumption by ~99.95%.
As shown in Figure 1, the Merge represents the moment where the two systems Ethereum’s mainnet running on PoW and the Beacon Chain running on PoS, come together. This will see the PoW consensus algorithm replaced by proof-of-stake – permanently.
Figure 1: Ethereum’s upgrade path
Now Proof-of-stake (PoS) can be enlightened. PoS is a type of consensus mechanism of blockchains to achieve distributed consensus. In proof-of-stake, validators (A block proposer is a validator that has been pseudorandomly selected to build a block) explicitly stake capital in the form of ether into a smart contract on Ethereum. This staked ether then acts as collateral that can be destroyed if the validator behaves dishonestly or lazily. The validator is then responsible for checking that new blocks propagated over the network are valid and occasionally creating and propagating new blocks themselves.
We can show three key reasons why PoS is superior to PoW:
- PoS offers more security for the same or lesser cost
- Attacks are much easier to overcome from proof of stake
- Proof of stake is more decentralized than ASICs.
[ Note : ASIC is an application-specific integrated circuit. ASIC miner is a computerized device or hardware that uses ASICs for the sole purpose of mining bitcoin or another cryptocurrency.]
Now, to emphasize the Beacon Chain, we will start from the base problem of Blockchain: scalability. For decentralization, blockchains need to scale horizontally, which means adding more nodes. The goal of Ethereum 2.0, also called eth2 or Serenity, is for nodes to run on consumer hardware. Here the concept of Sharding comes into the picture.
Sharding is the term for horizontally partitioning a database. Ethereum can only handle about 15 transactions a second. With Sharding, Ethereum can scale thousands of transactions by splitting the Blockchain into “shards” (separate chains). Generally, a shard chain has a subset of nodes processing it. Virtual miners, and validators, are assigned to shards and only process and validate transactions in that shard (chain). Ethereum’s shards have a dynamic subset of nodes processing it block-by-block. The main challenge with Sharding a blockchain is the security of shards. Since validators are spread out across shards, malicious validators could take over a single shard. The current eth2 plan is for 64 shards.
It’s time to discuss Ethereum 2.0 Phases. Briefly, Ethereum 2.0 has three phases:
Phase 0 – Beacon Chain
Phase 1 – shards
Phase 2 – execution
These phases are analogous to the human body like:
Phase 0 – heart
Phase 1 – limbs
Phase 2 – brain
All phases are integral to the system and have different characteristics. There are some concepts like slot and epoch. A slot is a chance for a block to be added to the Beacon Chain and shards. Ethereum 2.0 progresses in epochs. An epoch is a bundle of up to 32 blocks that validators propose and attest to over roughly 6.4 minutes.
Every 12 seconds, one beacon (chain) block and 64 shard blocks are added when the system runs optimally. Validators do need to be roughly synchronized with time. Genesis blocks for the Beacon Chain and shards are at Slot 0.
This is a brief technical idea about the Merge. Extra resources added at the end of the article for further reading. The Merge is expected to land within 19th September 2022 approximately. This will end the proof of work for Ethereum. It will start an era of a more sustainable, eco-friendly Ethereum. This will open the scope for future scalability and upgrades. This will bring Ethereum one step closer to achieving the full scale, security, and sustainability outlined in its Ethereum vision.
The Beacon Chain Ethereum 2.0 explainer you need to read first | ethos.dev