What Is Ethereum 2.0 - And Why Is It So Important?

BlockchainJan 10, 2023
What Is Ethereum 2.0

Back in 2015, Vitalik Buterin launched the Ethereum network.

At that time, he designed the Ethereum network to function through a proof of work consensus model and serve as an Ethereum blockchain platform where anyone could execute many activities at high speed.

The Ethereum network proof of work consensus model has a not-so-complex block reward mining process where complex mathematical puzzles verify transactions on the Ethereum network.

Through proof of work, Ethereum miners use mining to validate Ethereum transactions made on the Ethereum network and earn rewards for participating in the Ethereum ecosystem.

Recently, the Ethereum network went through two upgrades. Initially, the first upgrade was from proof of work Ethereum mainnet to a separate new network – a proof of stake beacon chain, created to serve as a new and improved Ethereum blockchain. The proof of stake model is a consensus mechanism where Ethereum miners earn more block rewards depending on how much staked Eth they already have on the Ethereum network.

The Ethereum Foundation identifies the proof of stake layer as the "consensus layer or beacon chain," and the proof of work layer as the "execution layer or Ethereum mainnet." However, the Ethereum community identifies "Eth2" & "Eth1," as the "consensus" & "execution" layers, respectively.

After testing the proof of stake consensus layer as a separate layer, the Ethereum foundation has brought about the merge.

The merged Ethereum network is the second upgrade to the Ethereum network and is currently used to validate the blocks of transactions on the Ethereum blockchain.

After this read, you will realize the stages the Ethereum network has gone through and how they function to provide users with a scalable network.

What is the Ethereum Merge?

The Ethereum Merge is the second phase of the upgrade and the current Ethereum network that combines two different consensus mechanisms.

The Ethereum mainnet and the Beacon chain are the consensus models that make up the Ethereum Merge. On Ethereum's merged block, the Ethereum mainnet and the Ethereum beacon chain function through proof of stake.

The merge signifies the complete change to the proof of stake validation protocol that utilizes staking services.

The Ethereum Merge now serves as a separate blockchain, swapping proof of work with the proof of stake validation process.

What is Ethereum 2.0?

Ethereum 2.0 (also known as Beacon chain) is the first upgrade that validates transactions through the proof of stake consensus mechanism, unlike Ethereum 1.0, which validates transactions using proof of work.

On the Ethereum 2.0 network, validators of Ethereum transactions can earn more by staking rewards.

Ethereum 2.0 requires fewer gas fees and maintains the decentralized way users love to process transactions on the Ethereum blockchain. The Ethereum 2.0 upgrade also provides a platform where users can process more transactions simultaneously. The only discomfort regular miners might experience through this upgrade is that for anyone to partake in a validation process, they must stake a minimum of around 32 ETH tokens.

But anyone can still join one of the many staking pools to make up the difference. A staking pool combines several stakers aiming to achieve the total staking amount required to become a validator on Ethereum's blockchain.

Ethereum 1.0 vs. Ethereum 2.0: What’s the difference?

Ethereum 2.0 functions on pos blockchains, while Ethereum 1.0 functions on pow blockchains. With pos blockchains, the Ethereum network's scalability is far higher than when it used just the pow blockchain.

Ethereum 2.0 provides an increased level of transaction speed. It provides a platform where users create secure smart contracts faster than before.

What is Proof-of-Stake (PoS)?

Proof of Stake (or the PoS blockchain) is a consensus layer that allows users to earn more by staking eth tokens over time. The more you stake, the more block rewards you can earn.

The Proof of Stack model has increased the Ethereum network's scalability by a tremendous amount. The Ethereum network now provides an even more cost-friendly service approach to validating Ethereum transactions and earning a fair share of rewards.

A staking pool is easy to join. To become a validator, all you need to do is join staking pools. Ethereum 2.0’s proof of work verification process has increased the number of people who can participate in validating Ethereum transactions, adding a boost to the Ethereum ecosystem.

Ethereum 2.0 Roadmap

The upgrade to Ethereum 2.0 has gone on since 2020, and these are the phases which it went through:

Phase 0

This phase was the launch of Ethereum 2.0's beacon chain. During this phase, the beacon chain could only execute some activities on the execution layer as a live blockchain test.

Phase 1

In this next phase, Ethereum 2.0 implements shard chains. Shard chains are the separate chains that will make up Ethereum's blockchain after this phase. Shard chains are a huge factor in increasing the scalability of Ethereum's network.

Phase 1.5

Phase 1.5 is the merge phase that brought the pow and pos chains together to form one pos chain.

This phase did not affect any users of the former pow chain, and it provided a barely noticeable smooth transition.

Phase 2

This phase needs to be more detailed but believed to be when the beacon chain can fully partake in all Ethereum network functionalities, such as the pow execution layer.

At this phase, Ethereum 2.0 will function at its full capabilities.

Ethereum 1. x

This final phase also needs to be more detailed. It is described as a developmental phase where Ethereum developers strive to improve Ethereum 1.0 as users continue to enjoy the benefits of Ethereum 2.0.

Benefits of Ethereum 2.0

Greater scalability

The proof of stake layer that Ethereum 2.0 functions on provides Eth holders with better, more considerable returns on their staked Eth.

The Ethereum 2.0 network rewards Eth holders depending on the amount of Eth they retain on the Ethereum network, and this means the more Eth you stake, the more reward you can earn as a Validator. The new validation method is more cost-effective and an excellent method of increasing earnings by saving Eth.

And with shard chains that enable 9,970 more transactions than the initial 30. The rate at which you can earn will increase at a faster rate.

Increased decentralization

Ethereum 2.0 provides more decentralization than Ethereum 1.0 did. It further strengthens the trend of decentralization in the crypto market.

By implementing the proof of stack validation method, more people can become validators through staking pools or by staking their own Eth to become validators.

A more significant number of Validators has emerged since the launch of Ethereum 2.0, and that has further increased the decentralized network of Ethereum transactions.

Enhanced security

Ethereum 2.0 uses proof of stake to validate transactions faster than Ethereum 1.0.

With the increased speed Ethereum 2.0 processes transactions, Ethereum 2.0 has added many more layers to the already dependable level of security it provides.

On Ethereum 2.0, Validation is faster. With proof of stake, Ethereum 2.0 has gathered a more significant number of Eth holders staking Eth, which they need to remain online to maintain.

By locking down staked Eth, Ethereum 2.0 has provided a robust and reliable level of security for its users.

Faster and cheaper transactions

With Ethereum 2.0, the Ethereum community can validate transactions faster and experience reduced transaction fees.

The new speed at which transactions can get processed simultaneously ensures that users of the Ethereum proof of stake network can enjoy a more excellent user experience.

Ethereum 2.0 allows users to quickly and speedily execute activities with a less disruptive workflow.

Ethereum 2.0's proof of stake transaction method also reduces the money spent on powering mining machines to maintain the Ethereum network.


The successful launch of Ethereum 2.0 is a major upgrade to the level of services provided by Ethereum.

The Ethereum foundation believes that this major upgrade has increased Ethereum's network's scalability to a level of better-optimized cost.

Ethereum's price on the crypto market has responded well to the upgrade to Ethereum 2.0. The upgrade will not only moderately decrease the electricity consumption required to validate Ethereum blockchain transactions, but it will also increase the rewards earned from it.

Several crypto enthusiasts have tweeted that Ethereum's price on the crypto market might experience a drop post-merge.

But the new Ethereum network is doing a great job, and you better believe the Ethereum foundation has much more innovation ready to share with the crypto market.

Matias Lapuschin
Matias Lapuschin
Head of Content Marketing

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