Ethereum 2.0: how it works and why it matters – CoinDesk

Ethereum 2.0 is coming.

The year-long upgrade – which is set to radically change the world’s largest smart contract platform – is getting closer and closer to deployment. The Ethereum Foundation recently announced “Medalla”, a final test network before the mainnet launch of the Eth 2.0 beacon chain.

As of July 10, some developers, including Ethereum founder Vitalik Buterin, estimate that the often delayed Eth 2.0 will hit the market by the end of this year.

To mark the fifth anniversary of the network’s launch, CoinDesk is producing Ethereum at Five – a cross-platform series with special coverage, a limited newsletter, and live streaming discussions on Twitter. New issues and sessions appear daily from July 27th through July 31st. The pop-up experience precedes another event in September that will focus on Eth 2.0.

When phase zero of Eth 2.0 is delivered, little will change in Ethereum for users and Dapp developers in the near future. This is because, unlike all other system-wide upgrades in Ethereum’s history, the Eth 2.0 overhaul will primarily take place on a different blockchain.

The first phase of development for Eth 2.0 is focused on creating a separate proof-of-stake blockchain network called the Beacon Chain. In this new network, ETH holders can earn at least 32 ETH rewards in the form of annualized interest on their assets. To earn these rewards, ETH holders must have the appropriate hardware and software connected to the beacon chain and a strong understanding of how the technology works.

A new 22-page report from CoinDesk Research explains the technology behind Eth 2.0 and the stages of development it will go through in the years after its launch.

Read CoinDesk Research’s full report on Eth 2.0

Ethereum as we know it today will eventually go fully into the Eth 2.0 upgrade. The report includes comments from Ethereum developers about the benefits – but also risks – this can bring.

The report also discusses the potential market impact of Eth 2.0, including the impact of the new system’s economic design on coin supply, speed, and value.

Why it matters

As the culmination of over five years of research and development, Ethereum 2.0 is a very ambitious upgrade.

Never before has the cryptocurrency industry seen a blockchain of the same size and value as Ethereum is trying to move all users and assets to an entirely new decentralized network, while keeping all operations active and running on the old network.

Read more: Ethereum turns five next week: How CoinDesk marks the milestone

It will likely take many years to complete the upgrade from Ethereum 2.0 – in all of its complexity. However, the developer comments included in this report suggest that the biggest hurdle (and perhaps the most important milestone) in the Ethereum 2.0 roadmap is first-time launch.

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