The Difference Between Ethereum and Ethereum 2.0 and the Future of Ethereum Network

The Difference Between Ethereum and Ethereum 2.0 and the Future of Ethereum Network

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Throughout its history, the Ethereum’s blockchain network has experienced many events, both minor like small updates to Ethereum 1.0, and major changes that affected its fundamental principles, including the network’s transition from PoW consensus mechanism (Proof-of-Work, mining) to PoS (Proof-of-Stake), or Ethereum 2.0. However, how much is Ethereum 2.0 better than Ethereum 1.0, and what are the main differences between them?

This article will shed some light on what the Ethereum 1.0 and 2.0 versions of the network are, their main differences, and how the network will develop in the future.

Key Takeaways

  • The main feature of Ethereum 1.0 is the use of the Proof of Work consensus mechanism.
  • With the arrival of Ethereum 2.0, it became possible to increase the scalability of the network and switch to the Proof of Stake protocol.
  • The future of the Ethereum network lies in staking, which will support the process of validating new blocks in it.

What is Ethereum 1.0?

Ethereum 1.0 (or Ethereum mainnet) is a version of the blockchain network that operates based on the PoW protocol and allows for the mining of ETH tokens. In general terms, this version represents the entire period of existence of the network since the Ethereum launch in 2015 and including all updates and hard forks until the moment of the significant upgrade, which took place on September 15, 2022, when the blockchain coins migrated from PoW consensus mechanism to PoS. PoS involves the verification of transactions by staking, which is a process of storing Ethereum coins on a cryptocurrency wallet to support all operations on the blockchain. This allowed for a dramatic change in the underlying increased efficiency of the network, its security, and scalability.

Over the lifetime of Ethereum 1.0, the network went through many hard forks, undergoing various kinds of changes with each upgrade, most of which were mainly aimed at increasing network throughput in terms of Ethereum transactions, reducing commission costs, and increasing security to prevent hacking attacks, which have occasionally occurred in the history of the coin. Ethereum 1.0 was a project whose objective was both to experiment with the PoW consensus mechanism, as well as to test whether it could switch to another consensus mechanism (PoS), a decision that was made after unsuccessful attempts to scale the network so that it would meet technical regulations regarding transaction speed and security.

After the Shanghai update, the Ethereum blockchain network allowed all coin holders to withdraw coins from the staking for reinvestment opportunities.

What is Ethereum 2.0?

The Ethereum 2.0 network is a large-scale upgrade of its fundamental principles, which focuses on improving scalability and called “Merge”, which is the first precedent in the history of the crypto world for the transition of the operating blockchain from the Proof-of-Work algorithm to Proof-of-Stake. Previously, miners aligned new blocks on the Ethereum blockchain, but after the Merge, holders of digital coins ensure the blockchain’s performance and are rewarded for doing so.

As part of the Ethereum 2.0 update, a phased network transition from one consensus mechanism to another is planned. The roadmap contains three main steps: Beacon Chain, Merge, and Sharding. 

Beacon Chain is the coordination mechanism for the new network, responsible for creating new blocks, verifying that these new blocks are valid, and rewarding ETH validators for securing the network. Sharding means partitioning a database to increase capacity; this technology is already used in programming. In the context of Ethereum, sharding reduces the load on the network and increases the number of transactions by creating new chains, known as “shards”. This will significantly increase the number of transactions and data capacity on the network.

What are the Key Differences Between Ethereum 1.0 and Ethereum 2.0?

The Ethereum Coin Network was the first in history to receive such a dramatic change in its operating principles. The Merge completely changed the face of blockchain, giving it new life and the opportunity to develop new technological solutions based on the new “stuffing”. Either way, the upgrade has benefited the network, improving it in many ways. Let’s look below at the fundamental differences between Ethereum 1.0 and Ethereum 2.0 upgrades regarding blockchain, security, and other parameters.

Consensus Protocol

The first and most important difference between the two versions of the network is the consensus protocol used. Ethereum 1.0 used the Proof of Work mechanism, which involves mining new ETH blocks to confirm transactions and verify blockchain data. In turn, Ethereum 2.0 uses the stake consensus mechanism Proof of Stake, in which token holders are rewarded for holding coins that are used as tools to maintain the network.

Blockchain Conception

To understand the difference between the two updates within this criterion, it is necessary to understand that the blockchain is a chain of blocks that are verified using the computing power of mining equipment. Ethereum 1.0 is a classic blockchain network model, where the chain of blocks is continuous and sequential, containing encoded information about all transactions. Ethereum 2.0 is a new model for the operation of the blockchain system, in which it is divided into small parts called shard chains, which allows transactions to be processed in parallel chains, rather than sequential ones.

Security

Ethereum 1.0 follows traditional PoW blockchain rules, where a significant player controls all network activity during mining by owning more than 50% of the network’s processing power, which could theoretically lead to vulnerabilities such as 51% of attacks. This feature of the PoW mechanism has been a major concern during the coin’s existence, posing a security risk.

Ethereum protocol 2.0 has no miners controlling the blockchain, making it impossible to control mining power. The network requires about 16,000 validators with the new consensus protocol, making it more decentralized, secure, and less prone to manipulation.

Speed

Network transaction speed is one of the most important indicators of network performance. In Ethereum 1.0, the network could only support about 30 transactions per second, which led to delays and congestion.

Ethereum 2.0 has a performance of 100,000 transactions per second, according to official figures. This increase was achieved through the introduction of shard chains. Moreover, by applying second-tier solutions, such as rollups, as well as various side-chains, even higher transaction speeds will be achieved in the future, both within the Ethereum ecosystem and with third-party networks. In particular, sharding is believed to bring dramatic changes to the network. The concept behind sharding is to divide the network into multiple sections that can operate partially independently. By dividing the blockchain into different sections, the number of transactions that can be processed can be increased significantly.

Energy

Using The POW Consensus in Ethereum 1.0 implied the use of mining equipment, a form of computer hardware with a video card or a mining farm to carry out the mining process. A mining farm is a complex made up of many interconnected machines that utilize powerful video cards to run large amounts of processing power. Mining has many negative consequences, including extremely high power consumption, environmental risks, high cost of equipment and not the best security. 

The use of PoS consensus in the Ethereum 2.0 network eliminates the involvement of miners to mine new blocks, replacing them with validators that confirm transactions. The new model does not require the use of special high-tech and complex equipment, which helps to avoid problems with high power consumption, as is the case with PoW. The whole process of mining new coins is simplified by staking, when users store their coins inside the blockchain and get rewards in form of the network commission.

Scalability

Scalability is essential to electronic, software and database systems, routers, networks, etc., if required to operate under heavy workloads. A system is called scalable if it can increase performance in proportion to the additional resources. Scalability can be estimated through the ratio of the increase in implementation of the system to the increase in resources used. The closer this ratio is to one, the better. Scalability also means increasing additional resources without structural changes to the system’s central node.

As mentioned above, Ethereum 1.0 had many limitations, which could create problems in the future influencing the scalability of the network. Ethereum 2.0 solves all of the issues by introducing PoS and the shard chain.

Gas Fees

Under Ethereum 1.0, in order to process a large stream of transactions, you had to pay a high gas fee. Particularly within Ethereum 2.0, with the arrival of the “London” update, many solutions were implemented to make transactions in Ethereum more predictable for users by revising the commission mechanism. Beginning with the “London” network update, each block has a base commission, a minimum cost per unit of gas to be included, calculated by the network based on the demand for space in the block. The high-level improvements presented in this change include better forecasting of transaction fees, faster processing of transactions overall, and compensation for issuing new ETH by burning down a share of transaction fees.

Future Prospects of Ethereum Network Development

Today, after the Ethereum Shanghai upgrade, there is no mining in the Ethereum 2.0 network, which means that the confirmation of blocks occurs due to the delegation of users of their coins to master nodes. These ETHs are frozen, and as a reward, users receive part of the new coins. After the network switched from one algorithm to another, the principles have completely changed, which now makes it possible to validate transactions less costly and more secure, and for users to receive passive income from storing digital currencies.

Second-tier solutions such as Optimistic– and Validity-rollups, while utilizing zero-disclosure proof technology, are expected to be a key tool in shaping the future of Ethereum. They will enable trustless, complex and permissionless transactions on a much larger scale. Validity rollups have an important advantage over Optimistic rollups in that they are quick to complete. In addition, not long ago, the Ethereum roadmap was changed to support named rollups at the blockchain level.

Ethereum will strive for even greater scalability by offering new solutions to improve the network, namely speeding up transactions, improving security and overall blockchain efficiency. The future of blockchain scalability involves running complex decentralized applications based on L2 networks or recursive rollups. This, in turn, could lead to almost infinite scalability while decentralizing and securing the first-level blockchain. So over the long run, L1-networks will become the settlement layer, and complex decentralized applications will simply migrate to Layer 2 networks.

Ethereum is a living, evolving project whose developers are methodically working to fix its flaws and are focused on long-term development. They are constantly circumventing the limitations of the network, updating development tools, and approving new relevant EIP standards. Ethereum developers already have plans for where Ethereum will go after the update. This approach is paying off – the ecosystem is evolving despite scaling issues. Of course, a complete transition to version 2.0 is unlikely to be smooth – glitches are inevitable. But the long-awaited update will not overnight solve the problems with scaling and expensive commissions.

The new force that will change Ethereum and subdue it is the stakers or validators. Stakers are much more dependent on the ETH exchange rate than miners, as they have to keep the coins in their wallets at all times. Stakers can generally include those who have transferred their ETH to staking pools or to a corresponding account on an exchange. But the pool/exchange operator, which runs and maintains the transaction validator nodes, will be responsible for operating their coins in the blockchain. After the final transition to PoS, validators will not only take over the functions of miners to confirm transactions and issue new coins – they will become, in fact, the sole force controlling both the operation of the blockchain itself and the adoption of architectural changes and technical updates.

Conclusion

Undergoing massive changes, the Ethereum network is moving towards becoming a universal tool for launching new projects using smart contracts, which will further accelerate the elaboration of the crypto space. Operating on a new algorithm that assumes Ethereum staking, the network will become safer, more efficient, and faster, which will help develop new methods of interaction between the financial sector and the world of crypto technologies.

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