Ethereum 2.0 Explained: Full Breakdown of #ETH2 and How It Works

Hey Cadets! Even if you are someone who doesn’t 
really keep up with the crypto sector,   you have probably heard of Ethereum at least once. 
This crypto giant has been trending throughout   the year, along with Elon Musk’s dogecoin and 
the rest of crypto twitter’s bitcoin maxi’s. For all the Ethereans, something big is on 
the way… That’s right… It’s Ethereum   2.0! The implementation of this long-awaited 
major upgrade started on December 1, 2020,   and it is going to revolutionize 
blockchain technology forever.  Ethereum’s current systems will be getting 
a complete overhaul with the 2.0 version,   with the aim of making the existing 
Ethereum public mainnet more powerful,   more scalable, greener, more sustainable, 
and more secure. Phew, that’s quite a lot. But wait! There’s more! From a user’s perspective, 
the most important thing is that there will be   a ton of opportunities to earn a great passive 
income on your ETH investments through staking. However, we have to keep in mind 
that this upgrade is not an act of   snapping fingers like Thanos to make 
the previous version of Ethereum   disappear.

The process of changing will be gradual 
and require a lot of development and patience.  In this video, we will be trying to make the 
concept of ETH 2.0 as understandable as possible,   so you can explain this concept to 
anybody in simple terms. You might   even impress your next-door crush who just 
might be a crypto nerd. Hey, you never know. So, ready to explore the world of Ethereum 2.0? 
I’m Captain Crypto and welcome to Cryptonauts. The best way to figure out Ethereum 2.0 is by 
understanding how it differs from its predecessor.  Originally, Ethereum operates on the 
Proof-of-Work consensus mechanism.   It is the same mechanism that Bitcoin 
currently uses at the moment.

However,   this system is far from perfect, as there 
are three major flaws associated with it. Number 1! It consumes a lot of energy to 
validate transactions and keep the network   secure. 717,797 US households could 
be powered by the energy expended   on validating the Ethereum 
network for a single day! Number 2! It’s way too slow. The current version 
of Ethereum can process around 15 transactions   per second, which is miles behind VISA that can 
process a massive 65,000 transactions per second.

Number 3!: It is a bit centralized. Large 
crypto miners build their facilities in   places where the electricity is cheap. As 
an example, four mining pools of which the   majority are located in China control more 
than 50% of the total Bitcoin mining power. Learn more about the differences between   Proof-of-Work and Proof of 
Stake by clicking right here Now that we’ve established the main problems 
that hold Ethereum back from reaching its goals,   we can move on to the solutions.

But 
every story has a hero, and this is   where the Ethereum 2.0 development 
program swoops in to save the day. The upgrades to scalability, security, 
and sustainability from Ethereum 2.0   come from the swap to the 
Proof-of-Stake mechanism.   However, there is one more thing that makes 
this upgrade complete, and that is sharding. So, what is sharding and how does it solve 
the problem? Well, think of a glass jar.   If I accidentally drop it on the floor, it 
breaks into hundreds and thousands of shards.   In a similar way, the Ethereum 
blockchain can be split into   several shards. Shard chains split the 
Ethereum blockchain and divide the data   processing responsibility among multiple 
nodes instead of a single node. As a result,   sharding makes it possible for transactions 
to be processed in parallel rather than   consecutively. This makes Ethereum capable of 
executing thousands of transactions per second! So, this amazing duo of PoS & Shard Chains 
are the two most important things about   Ethereum 2.0. Alright. Now let’s move 
on to the next part – the timeline. For those who are wondering if 
Ethereum 2.0 has been launched yet,   the answer is both a yes and a no.

Ethereum 2.0 
is going to be a multi-phase rollout starting   with Phase 0 and ending at Phase 3. Phase 0 
already kickstarted on December 1 2020, but   a full upgrade rollout might take 2 or 3 years.
One important thing to keep in mind here is that   Ethereum 2.0 will launch as a separate network. 
What this means is that Ethereum 1.0 will not   be instantly flushed out but will co-exist in 
parallel with the Ethereum 2.0 development phase.   Let’s take a closer look at the 
separate phases of the upgrade. PHASE 0:
The Ethereum 2.0   launch was officially set into motion with 
the Phase 0 deployment on December 1, 2020.   The objective of this phase is to allow 
the seamless migration of validators   from a Proof-of-Work-based Ethereum to a 
Proof-of-Stake-based Ethereum network with   the help of the Beacon chain.

The beacon chain 
acts like a bridge that makes all this possible. The new PoS mechanism, called Casper, will replace 
the current Proof of Work engine in Ethereum 2.0.   Casper will be delivered via the Beacon Chain, 
which will be the system chain of Ethereum 2.0. We should also keep in mind that the beacon 
chain doesn’t change the Ethereum you use today.   You can still send ETH to a friend, 
swap tokens on MetaMask or Uniswap,   and play with those blockchain 
games you so dearly love.

PHASE 1:
With the beacon   chain and its PoS system running smoothly, Phase 
1 will activate Ethereum 2.0’s primary scalability   solution – sharding. As we previously mentioned, 
sharding will multiply the network’s throughput   and speed. The 64 PoS shards that will be deployed 
in this Phase will boost the throughput 64 times. PHASE 1.5:  Ethereum 2.0 acts as a separate network from 
Ethereum up until the rollout of Phase 1.5.   Once the docking is done, the transfers of ETH 
made from Ethereum to Ethereum 2.0 would become   impossible to reverse, while the dApps built 
on one network will not exist in the other.  This phase signifies the merge 
of Ethereum 1.0 and Ethereum 2.0.

PHASE 2:
Phase 2 represents   the activation of the functionality for 
dApp deployment natively on Ethereum 2.0.   Once communication between all 64 shards and the 
beacon chain is fully tested, Phase 2 will enable   users to store and deploy new smart contract data 
on any of the shards in the Ethereum 2.0 network. PHASE 3:
Out of all the previous   phases we discussed, Phase 3 is the least defined.
In the words of Vitalik Buterin, this phase is   reserved for “other stuff that we want to add down 
the line.” This could mean adding more shards to   the Ethereum 2.0 network or new cryptographic 
technology such as Zero-Knowledge Scalable   Transparent Arguments of Knowledge (ZK-STARKs).
STAKING ETH 2.0:THE PASSIVE INCOME GENERATOR  One of the most exciting opportunities with 
Ethereum 2.0 is the ability to earn passive income   by staking your ETH. The good thing here is that 
staking eliminates the need for expensive hardware   and greatly reduces the entry barrier to the 
staking game. You can run a validator node   with just three things:
A decent laptop  32 ETH
Good internet connection  For those that think that 32 ETH does not 
fit in their pocket size, no need to fret:   there are already several staking pools and 
services that make participation possible for   everyone, regardless of the size of your holdings.
In order to earn staking rewards on Ethereum 2.0,   you will need to lock your ETH holdings. 
The purpose of this is to make sure that you   participate in the network as an honest validator.
If you want to learn more about staking on   Ethereum 2.0, you can check out the Ethereum 
launchpad, which will take you through the   process of setting up a validator node 
in a step-by-step fashion.

Just hit the   URL – www.launchpad.ethereum.org 
in your favorite browser.  With all that being said, be mindful of one thing: 
once you migrate your Ether into Ethereum 2.0,   you won’t be able to extract it back 
until Ethereum 1.0 and Ethereum 2.0 merge. So, what do you say, fellow Cryptonauts? 
Are you going to stake your Ether right now,   or possibly wait until the network finishes with 
the Ethereum 2.0 deployment? Or are you maybe   staking your Ethereum already? Let us know 
in the comments! And if you liked the video,   don’t forget to like, subscribe, and push 
that notification bell.

And as always,   HODL, secure your crypto, and may 
Satoshi and Vitalik be with you, always..

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