Since last year, the Ethereum blockchain has announced a major upgrade to the whole system. This update or a total overhaul is called Ethereum 2.0. Ethereum 2.0 is basically an upgrade to the already existing Ethereum on various levels. The main goal of this upgrade is to increase the capacity of the network and make it more sustainable (keeping in view the energy footprint of mining in general).
The biggest change in the Ethereum network is the change in its consensus mechanism. Ethereum 2.0 has adopted proof-of-stake (PoS) consensus rather than the previous proof-of-work (PoW). We will now understand both these mechanisms and which one is better than the other.
So, what makes this upgrade so important is that the whole world is excited about it. Does this upgrade end Ethereum mining?
Ethereum Proof of Work
To understand how cryptocurrencies work, you need to understand the basics of blockchain and a suitable consensus mechanism. The consensus mechanism is a crucial part of any cryptocurrency because this is what keeps the system unexploitable and secure. The proof-of-work consensus mechanism is basically a decentralized consensus mechanism that requires members of the network and their computational power to solve arbitrary mathematical puzzles.
In cryptocurrency, proof-of-work is used for validating transactions and generating new tokens (coins). This proof-of-work basically acts as a bank through which transactions can be processed but without the need of a third party. Ironically, banks, in general, are a third party in normal currency transactions.
Ethereum 2.0 Proof of Stake
The proof-of-stake consensus mechanism was considered a novel mechanism. Because it requires far less processing power for a node (system) than the proof-of-work. The proof-of-stake consensus mechanism randomly assigns the node that will mine or validate the block transaction. Due to this mechanism, Ethereum holders will be able to “stake” their ether and in return earn their reward. Since the mechanism arbitrarily assigns the node for validating the transaction, the more you “stake”, the greater is your chance to get assigned for validating the block.
The main goal of this model is to reduce the energy consumption that is otherwise used in running power-hungry machines for longer periods of time (24/7) for mining. This proof-of-stake mechanism allows for faster and more efficient transactions with lesser resources such as processing and energy compared to the proof-of-work.
How Ethereum 2.0 will be profitable
The big question, which will be more profitable when compared. Since you now understand the basic difference between the two mechanisms, you should know that proof-of-stake allows for more transactions with less energy consumed. Ultimately making proof-of-stake more profitable and efficient. This will make Ethereum 2.0 much more profitable than Ethereum.
Since this system is yet to be launched and there is still a lot of time, you can therefore check out some of the Best Graphics Cards For Mining Ethereum.
Is Ethereum 2.0 Released
The short answer is that Ethereum 2.0 has NOT yet been released. Although it has been divided into several layers which will take place in order. The first phase that will lay the groundwork for the transition of the consensus mechanism has been live for several months. But the crucial phase which will transform Ethereum has not been launched.
This update will be changing some key aspects of the while model on which Ethereum works currently. After the release, only those who already have mined or bought a minimum of 32 ETH. This bar is set to standardize the chances one will have while staking.
Meanwhile, you can explore the Best ASIC Miners For Mining Ethereum.
Ethereum 2.0 Update
According to the official Ethereum spokespersons and website, the Ethereum 2.0 upgrade has been divided into three phases. Since it completely changes the way Ethereum is understood in the world, it requires a lot of time to be introduced in the main net.
The Beacon Chain
The first phase namely The Beacon Chain is for laying the groundwork for the major upgrade. The Beacon Chain runs the proof-of-stake consensus mechanism in parallel to the basic proof-of-work mechanism. The Beacon Chain is for rigorously testing the new mechanism and forms the basis of the transition between the two different consensus mechanisms.
The Beacon Chain has been live since December 2020.
This phase is the most crucial part of the transition. As it is supposed to merge the new and old consensus mechanisms into a single network. In this phase, The Beacon Chain has to “merge” with the Mainnet Ethereum. This Merge is to introduce the proof-of-stake mechanism to the entire system and announce the ending of Ethereum mining.
The Merge is expected to go live at either the end of 2021 or early 2022.
Another major upgrade to the old Ethereum network is the introduction of “Sharding”. This concept has been introduced to improve Ethereum’s scalability and capacity. Sharding is the process of splitting up the database to spread the load. Sharding will reduce the processing required for a block to be validated by splitting it up in various new small chains called “Shards”. This will greatly increase the transactions per second and reduce the load on the nodes.
Not only this, due to Sharding, people will be able to mine (not exactly) by running the software on their daily-use laptop or even a mobile phone.
Sharding has been expected to be launched following the “The Merge”.
Ethereum vs Ethereum 2.0 vs Bitcoin Gas Fee
Since the Gas fee for Ethereum has been very high, people preferred to cash out their profits in either Bitcoin or some other crypto. The gas fee or the transaction fee goes high or low based on the congestion on the network and the availability of miners on the network. The new consensus mechanism of Ethereum 2.0 is designed to increase the number of transactions per second and lower the congestion on the system by sharding the blockchain. There will be a significant reduction in the Ethereum 2.0 gas fees. And stakers will be able to cash out easily without conversion.
Compared to Bitcoin, Ethereum has a much higher gas fee but this will surely change once Ethereum 2.0 launches.