What Is Ethereum 2.0 and Why Does It Matter?


After a long wait of 5 years, the crypto community celebrated the launch of a new network in December 2020, and ETH is now back to its ATH. But what is Ethereum 2.0, and why does it matter?

Ethereum was introduced by Vitalik Buterin and his crew in 2015, a revolutionary smart contract ecosystem to the blockchain industry, which soon became alone enough to be turned into a universe of its own within the crypto market. Cryptocurrency veterans have thoroughly enjoyed this period. But even in 2015, they knew that Ethereum still had a long way to go before reaching its full potential.

Profit Calculator
Use automated crypto trading strategies

In order to overcome its limiting features, Ethereum Foundation announced that they are planning to migrate from Proof of Work to Proof of Stake. The new network upgrade redefines how nodes validate blocks while bringing scalability to an unprecedented level at the same time. Research analysts say that, “Ethereum 2.0 can be the second biggest thing after Bitcoin'.

What is Ethereum 2.0?

Ethereum 2.0 is based on Proof-of-Stake, a consensus mechanism in which nodes validate transactions and blocks by staking tokens. In this case, anyone can participate in the network and run a node by depositing and locking 32 ETH.

Each node has a chance to be selected by the network, which gives it the right to propose a block. While the process is a bit randomized compared to Proof of Work, users who hold a larger amount of assets still have a higher chance to win. If the node successfully completes the task, the node’s owner earns money both for proposing the block and verifying it.

What is sharding?

Sharding is a scaling mechanism that splits a blockchain network into multiple parts called shards. This enables the blockchain to process and validate multiple blocks of transactions instead of approving one block at a time.

In order to prevent manipulation, Ethereum 2.0 periodically moves validators from one shard to another. Moreover, Ethereum uses the famous beacon chain to coordinate blocks and manage communication between shards.

Developers have made numerous plans that organized the migration of Ethereum to Ethereum 2.0 over the course of the past few years. By the time they were decisively ready to start actively working on the PoS network, it had become clear that the original blockchain’s size is a real problem.

In 2020, the Ethereum Foundation realized that they only have one smart choice: rollups.

The main idea is to launch Ethereum 2.0 in phases while ETH1 runs just as it would usually. Both networks work side-by-side until the moment arrives that Ethereum 2.0 can finally launch.

Ethereum 2.0 roadmap

There is a long time left before we say bye to ETH1 and hello to ETH2. While Ethereum developers have no fixed schedule that tells us when each phase launches, we at least know what these phases will do once they arrive.

Phase 0

Phase 0 of Ethereum 2.0 rolled out in December 2020. A deposit contract that was published a month earlier collected 524,288 ETH, the sum necessary to launch the project’s first stage.

Why 524,288 Ether specifically? Considering that each node must stake 32 ETH, we have a final number of 16,384. This is the number of validators required to keep Ethereum 2.0 decentralized and secure, according to the developers.

The data of each validator is stored in the Beacon chain, an essential part of the network that coordinates and manages the entire Ethereum 2.0 blockchain. As we have previously mentioned, this is the same entity that controls shards.

Aside from marking the official start of Ethereum 2.0, Phase 0 is not special in any way. The network cannot host dApps, execute smart contracts, or process transactions. It is merely a hub that allows the Ethereum foundation to slowly roll out future updates.

Phase 1

A majority of users expect that Ethereum will launch the next phase by Q2 2021.

In this stage, developers plan to add the sharding mechanism. Ethereum 2.0 will be divided into 64 separate chains called shards. They will run in a way that is interoperable and scales the entire network.

Phase 1.5

Nothing is ever sure with the developers at Ethereum. The team mentioned the (unconfirmed) possibility of adding another stage between Phase 1 and Phase 2. During this stage, Ethereum 1 would merge with the PoS network and convert into a blockchain shard.

However, it is suspected that Phase 1.5 will not happen at all. The community expects that Ethereum will merge with Ethereum 2.0 during the last phase.

Phase 2

The deeper we go, the less defined Ethereum’s future is. By the time of Phase 2, Ethereum 2.0 should implement sharding and dock ETH1 into ETH2. During this particular phase, we expect developers to finally add smart contract functionality. The latest version should be fully functional and retain all of the core features that Ethereum 1 has.

But is this really the last update for Ethereum 2.0? Not at all. The end of Phase 2 marks the start of a new smart contract and dApp ecosystem. The Ethereum Foundation still wishes to improve upon the new blockchain network and bring innovative features.


Ethereum 2.0 might be the second biggest thing in the blockchain industry after Bitcoin. The new Proof-of-Stake network brings scalability at a level never seen before with any other major blockchain network. Crypto enthusiasts have waited for this moment for years, and in 2021 we are closer than ever to the final launch of Ethereum 2.0.

You Might Also Want To Read

How Artificial Intelligence (AI) is bei…

Decentralized cryptocurrencies have gained a lot of attention over the last decade. Bitco…

Bitcoin’s Taproot Update — What Does It…

The Taproot Update was first proposed in 2018 by Gregory Maxwell, a Bitcoin Core (BTC) co…

How Global Tax Rates Affect Cryptocurre…

Cryptocurrency is truly Global and the concept of a global corporate tax rate is nothing …

Is crypto your dream investment ticket …

There have been countless crypto-based get-rich-quick scams, from Bitconnect-style Ponzi …

Who Hates Bitcoin and Why?

Governments, private banks, and all central banks, credit card industry giants, such as V…

Digital Yuan Vs Crypto Outlook in China

China has been working towards developing and launching its own national digital currency…