Ethereum is presently the 2nd largest cryptocurrency by market capitalisation behind Bitcoin. Both networks use a proof-of-work consensus model compared to a proof-of-stake model.
1. Proof-of-work: Competition is based on the amount of computational energy expended to propose valid blocks that meet the rules of the network. Those that propose valid and accepted blocks to the network receive a reward from doing so. Those that do not propose valid and accepted blocks do not receive rewards, even after expending computational energy.
2. Proof-of-stake: Opportunity to be selected to propose valid blocks is based on the amount of native network assets locked, or staked, to do so. A reward is given to those that propose valid and accepted blocks while no rewards are given to those that propose unaccepted blocks, and in some cases, a loss of stake may occur if malicious activity has occurred.
The Eth2 vision focuses on the following areas:
1. Security - By transitioning to a proof-of-stake model, the Ethereum protocol improves its security against coordinated attacks. This is because the network would be secured by validators that must stake a significant amount of the native netowrk asset, ETH, into the protocol. By doing so, the protocol can automatically punish or destroy their ETH if they try to attack the network or for malicious behaviour.
2. Sustainability - With its current proof-of-work model, the Ethereum network has become quite energy intensive. However, this transition to secure the network by ETH via staking and proof-of-stake will reduce the amount of energy consummed to secure the network.
3. Scalability - As the Ethereum continues to grow, it needs to be able to handle more transactions per second. As part of Eth2, a shard chain upgrade will be included to spread the load of the network across nodes and make each node more lightweight and less expensive to maintain.
The upcoming Beacon Chain, and subsequent planned Shard Chains in 2021 and the Docking in 2022, are extremely exciting events for the Ethereum community and virtual assets industry. Eth2 involves a completely new way of thinking about Ethereum, including far more equal opportunity to participate in the security of the network.
The minimum threshold of staked ETH has been reached to launch the Beacon Chain, and there is more available space to be an early adopter of Eth2. At Cartan Group, we run a variety of enterprise grade nodes and maintain a secure institutional IT infrastructure. If you want to better understand how to get involved with Eth2 or want to learn how to stake your ETH, please reach out to us and we will be happy to get you started.