Why is Ethereum 2.0 Crucial for the Future of the Cryptocurrency Market?

Ethereum 2.0 is a pretty significant event in the crypto world.

It is supposed to solve the current problems of the Ethereum system by implementing the upgrades that will serve to switch from Proof-of-Work to Proof-of-Stake consensus algorithms.

What are the current Ethereum issues, the solution, and how to become a validator on the Ethereum 2.0 platform? Find in this article.

What problems Ethereum has?

The most significant problem all crypto projects have is scalability.

Due to the decentralized nature of the blockchain ecosystem, the transaction processing speed has been compromised.

It is common to compromise between transaction speed and system decentralization when determining scalability in a crypto project.

With upcoming updates, Ethereum claims that it will process transactions faster without reducing ecosystem decentralization. And this is the primary goal of any crypto project.

Because of an increasing number of decentralized applications and the expansion of its ecosystems, security has become a growing Ethereums problem.

One study on the security of the Ethereum platform describes a total of 44 different Ethereum system vulnerabilities, leading to the hacks through which it was stolen over 370 million dollars were stolen from the Ethereum ecosystem.

What is a consensus algorithm?

The consensus algorithm is the process when all participants in a blockchain network reach a joint agreement on a distributed ledger’s current state.

The only fully proven consensus at the moment is the one used within the Bitcoin blockchain, Proof-of-Work. Although it is very secure, it has significant drawbacks regarding power consumption and transaction speed. Moving its ecosystem to a Proof-of-Stake consensus will bring many benefits to Ethereum.

Ethereum 2.0 upgrades

Here are the most important upgrades that will be released gradually.

Beacon chain

This is the first component of Ethereum 2.0 and a brand new Proof-of-Stake blockchain. Its essential function is to manage the PoS protocol for itself and other chains in the ecosystem. It tries to solve the scalability problem and works in parallel with the current Ethereum blockchain.

The smart contract will let validators participate in the Proof-of-Stake protocol after staking their ETH tokens. When validators pledge Ethereum to a smart contract, they are put in the Beacon chain.

Since random selection in the Beacon chain is essential, the Beacon chain will randomly select validators for the following block proposal and voting process. This results in stopping the association of specific validators and the negative impact they have on the system.


This is another part of the Ethereum 2.0 upgrade that should partly solve the scaling problem. Sharding means splitting the entire Ethereum network into multiple parts, i.e., shards.

Each shard is a separate blockchain with its independent state, status, a unique set of smart contracts, and transaction history. All fragments have the same Proof-of-Stake consensus with Beacon Chain.

Validators registered on the Beacon chain will become a global set of validators who validate the shards and the blocks on the Beacon chain.


One of the critical parts of Ethereum is smart contracts. They are currently written in the Solidity or Vyper programming languages ​​and compiled in Ethereum Virtual Machine (EVM).

eWASM replaces EVM. eWASM is based on WebAssembly (WASM). This change will make a massive difference in the number of transactions processed and added to the block.

The software is designed so that errors can be easily spotted and debugged. Due to these changes, the network will support more programming languages and will be more secure.


Most blockchains rely on the Proof-of-Work consensus algorithm, resulting in a secure network. On a negative note, this type of consensus consumes a lot of electricity, more than the whole country of Switzerland.

Ethereum 2.0 upgrade will try to prevent the waste of computing power and electricity. And Casper was developed to solve the Proof-of-Work problem.

There are two types of implementations: Friendly Finality Gadget (FFG), a combination of PoW and PoS, and Correct Buy Constructions (CBC), an entirely new PoS concept.

Ethereum 2.0 will support many transactions on the blockchain and have a balanced ratio of decentralization and security.

This blockchain technology can be a platform for developing a new economic system and global cooperation models and might become an infrastructure for universal value transfer globally.

If you want to know more about another Ethereum scalability solution — Plasma, and how to become a validator on the Ethereum 2.0 platform, read our full article on Ethereum 2.0 and its future.

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