Ethereum 2.0, the long-awaited upgrade to the Ethereum mainnet that promises scalability to the blockchain network that has struggled under the weight of its own success, shall launch when 16,384 validators stake a combined 524,288 ETH—as early as December 1—the Ethereum Foundation announced today.
When the validators stake the ~$200 million worth of Ethereum into ETH 2.0’s smart contracts, “Phase 0” will launch, springing the blockchain into action. But this is just the first step in a long process; only after several years will ETH 2.0 function like the ETH 1.0 mainnet does today.
But if all goes well, it’ll all be worth the wait. Ethereum 1.0 today processes about 14 transactions per second, a grumbling point of companies trying to profit from the blockchain and gratingly slow compared to Ethereum 2.0 and which may one day achieve transaction speeds per second of up to 100,000.
Ethereum 2.0 moves the blockchain to a proof-of-stake consensus mechanism, whereby transactions are validated by whomever stakes lots of ETH. That’s different to the incumbent proof-of-work consensus mechanism, which rewards the beefiest mining computers.
When it goes live around December, all the Phase 0 ETH 2.0 blockchain can do is validate blocks. “None of what you think of as the core functionality of Ethereum is enabled as part of phase zero,” Tim Ogilvie, CEO of Staked, a company that handles servers and infrastructure on behalf of stakers, told Decrypt. “You can't transfer [ETH], you can't participate in DeFi or other smart contract activities.”
All Phase 0 does, he said, is establish that the consensus mechanism that secures the network works, and there's enough money in there to secure the full assets of ETH. Later, Phase 1 will let you transfer ETH in and out of the smart contract and introduce sharding, a technique to make the blockchain faster. Phase 2 will re-introduce the full smart contract functionality we're used to with ETH1,” Scott Burke, CEO of Groundhog, an ETH-based subscription company, told Decrypt.
Ogilvie said that the most aggressive estimates for Phase 1 is six months and two years for Phase 2. “The more conservative estimates are significantly longer than that. So you're talking years before you have a full transition from ETH 1.0 to ETH 2.0.”
What could go wrong with the launch of Phase 0?
“There is not very much that can go wrong at this point. There have been numerous community testnets including 2 that were specifically created to test the genesis of the Beacon Chain and numerous bounties paid to individuals who found issues in the clients,” Quantstamp CEO Richard Ma told Decrypt. Quantstamp has audited several ETH 2.0 clients.
Ogilvie said that “hundreds” of bugs have been resolved, “thousands maybe, over the past year-plus in testnets.” But even when testers squash those bugs, “there will probably be lots of other ones.” Ogilvie said most of these are minor, but “the more consequential stuff is only revealed when you stop using fake money and start using real money.” Still, he’s unconcerned.
And how about delays? “This depends on the willingness of individuals to run validators,” said Ma. If people don’t provide the ~$200 million ETH, the show won’t start. Ogilvie said that one issue could be that the yields offered by the ETH 2.0 client is low compared to the lucrative yields offered by newer ETH 1.0-based DeFi protocols. And it’ll be a long time until stakers can withdraw staked ETH from the ETH 2.0 client.
“The smartest money probably waits on the sidelines for a while while they figure out exactly what that looks like,” said Ogilvie. He thinks that ETH superfans and the Ethereum Foundation will bankroll the project if there’s a shortfall.
About 1% of funds required to jumpstart the network have been staked so far. You can check how close Phase 0 is to launching on depositcontract.eth, a user-friendly Ethereum address minted by the Ethereum Name Service.
Brantly Millegan, Director of Operations of the Ethereum Name Service, told Decrypt that he is happy to play some small part in the launch, but that it’ll be years until his company, which currently relies on ETH 1.0, benefits from the scaling potential of ETH 2.0.
Millegan added that ETH 2.0 is but “one piece of the puzzle” when it comes to finding a solution to Ethereum’s bottlenecks. Other scaling solutions, such as layer 2 protocols, sidechains and more could all play a role. Everyone’s working on it “simultaneously,” he said.
Stay on top of crypto news, get daily updates in your inbox.