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Ethereum 2.0


2 months ago5 min read

I never write about crypto, outside of Hive/Steem. The space is ultra tribalistic, but more importantly, thus far, crypto just hasn't been that interesting or impressive. Based on my endless criticism of Steem, you could probably assume that I'm just as critical of pretty much every crypto project I'm aware of, and you'd be right. Today, there's not a single crypto project that's ready for mainstream adoption. And no, I'm not interested in debating about how your favourite coin is better, please don't bother, thanks.

Until Ethereum 2.0 releases. This is literally the only project I'm aware of that has a chance at wide adoption. It is late. Very, very late, pretty much like all crypto projects. But this is the first time that I'm feeling it might just be worth the wait.

First, some context. Irrespective of your religious (bagholding) affiliations, Bitcoin and Ethereum are the only two networks in this space that have seen any significant adoption. Both have achieved significant network effects which will likely never be overturned. Once again, I'm not interested in your favourite shitcoin, please limit discussion to Bitcoin or Ethereum here, thanks.

Both have a crippling issue, though - negligible throughput / transactions per second. There are other networks that offer significantly higher throughput (Hive included), but do so at high cost of security and decentralization, and even, long-term scalability. It's all about solving the "blockchain trilemma" - decentralization, security, and scalability. Oh, and just so I was not clear, please don't bother telling me how bitcoin mining pools are as centralized as Hive. I don't care, you're delusional, please don't bother, thanks.

Ethereum 2.0, by no means perfect, is the first time a network will get close enough. I'm not qualified to delve into the details - there's plenty of reading material online. I'd recommend this excellent video by Coinbureau for a primer, and the official specs for details.

But here's how they are going to solve the trilemma. First, with Phase 0, comes proof-of-stake. The Ethereum Research team has done a phenomenal job, thought of pretty much every edge case, and included an ingenious slashing mechanism to greatly disincentivize most malicious activity. It'll simply not be worth it. What about scalability? It comes with sharding.

Today, Ethereum 1.x's Layer 2 scaling solutions are exceedingly impressive - particularly zkRollup and Optimistic Rollup. They offer 2,000+ TPS today, with the possibility of privacy controls. The days of "blockchain all the things" is long gone, and as the industry matures, Layer 2 solutions will be key. Today, Loopring offers the best DEX experience I've had, basically being indistinguishable from a CEX in many ways, whilst running on Ethereum.

Ethereum 2.0 will only supercharge this with sharding. Starting with 64 shards, with the option to go up in the future, will bring massive scalability to a sufficiently secure and decentralized platform, but more importantly, heavily bootstrapped and actively network for the very first time.

What about bitcoin? It's likely going to continue to anchor this space as crypto's reserve asset. The most surprising thing about Ethereum 2.0 is that it's destined to become Bitcoin's scalability solution. Already, today, BTC-pegged tokens on Ethereum out-value the Lightning network.

When? It's going to be a long, gradual rollout. First comes Phase 0, which is spec-complete and has been running on testnet since late 2019. Audits have been completed, with some final fixes and optimization pending. This month, multi-client testnets are going live with near-final spec. Phase 0 is expected to release in Q3 of 2020. However, Phase 0 only introduces proof-of-stake.

Phase 1 sees the 64 shards go live, but with no execution, and limited utility, though will aid as a data-availability engine. Phase 1 is said to be 90% complete, and should release some time in 2021. Phase 1.5 will see the current Eth 1.x being merged into Eth 2.0 as it's own stateless shard. This will be the end of the road for the wasteful Proof of Work. Phase 2 is when the magic happens- that's when all 64 shards will come alive. Phase 2 is some ways off, I'm not expecting to see it before 2022.

Of course, Ethereum development does not end with 2.0 Phase 2, but it does signify a major milestone in crypto history. Vitalik recently posted this crazy roadmap for what comes beyond.

I'd also mention Cardano - they have the right ideas too, but I'm afraid it's going to be too little, too late.

Finally, once again, please don't bother shilling your favourite shitcoin. No one cares. Seriously, though Ethereum 2.0 will continue to have many limitations and there's definitely room for other networks.... as Layer 2 solutions or otherwise cross-communicating with Ethereum 2.0.

Disclaimer: Please do your own research. This is absolutely not a call to go out and buy ETH - it's economics are a different topic entirely. And yes, this is experimental, unreleased tech, and it can all come crashing down at release.


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