What Does Ethereum 2.0 Really Mean?
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What Does Ethereum 2.0 Really Mean?
Ethereum 2.0 primarily addresses blockchain's "impossible trinity" through three key technologies: sharding, proof-of-stake, and a new virtual machine.
Navigating Web3 tides with focused insightsEthereum 2.0
Ethereum 2.0 is frequently mentioned by major media outlets and represents the future of Ethereum.
No blockchain has endured as many challenges as Ethereum. As the birthplace of the majority of tokens and smart contracts, Ethereum holds an indescribable charm for developers and project teams. But Ethereum is not yet fully realized—it must cross the "Serenity" phase.
Originally, "Serenity" was planned to be executed via a hard fork, but due to greater-than-expected complexity, it is now being implemented through a long-term, gradual transition plan.
Why ETH 2.0?
Chromatic Capital notes that Ethereum can only process about 15 transactions per second. If complex applications were to scale, it would incur significant costs, while Visa can handle thousands of transactions per second. The reason for this "slowness" is Ethereum's commitment to maintaining decentralization.
In theory, one could rely on super nodes—"consensus nodes with sufficiently powerful servers"—to process every transaction. This solution is elegant: Ethereum could remain unchanged, simply running client processes in parallel more frequently.
However, Ethereum developers rejected this approach because it would compromise decentralization and censorship resistance. Blockchains face the so-called "impossible trilemma": decentralization, scalability, and security—three properties that trade off against each other. Ethereum serves as the foundation for all "second-generation blockchain" projects; for example, IOTA claims to solve this trilemma. Most proposed solutions to the trilemma, including Ethereum 2.0, involve replacing mining with an alternative consensus mechanism.
Thus, Ethereum’s old design (the first-class vault: referring here to PoW mining) is seen by some as somewhat of a failure. According to Chromatic Capital, Ethereum 2.0 is “a completely different project, adopting a zero-to-one paradigm, much like how blockchains dominate chains.” Ethereum 2.0 is not merely an upgrade—it redefines blockchain itself. Its goal is to make Ethereum more secure, scalable enough to handle thousands of transactions per second, and more programmable, all without sacrificing decentralization.
How does Ethereum 2.0 solve the "impossible trilemma"?
Ethereum 2.0 primarily addresses the blockchain "impossible trilemma" through three key technologies: sharding, proof-of-stake (PoS), and a new virtual machine.
Sharding is a technique that splits a database across multiple servers—in other words, partitioning the database into distinct segments. Just as a computer disk may have multiple partitions like C: and D:, yet reside on the same physical drive, the blockchain is divided into several parts while still maintaining consistency. The security of each "shard" is equivalent to that of the entire blockchain.
Proof-of-stake replaces miners with stakers—nodes that hold a certain amount of ETH. This approach saves energy, enables faster transaction finality, and better preserves validator decentralization. For years, Ethereum developers have been working on a consensus mechanism that quickly confirms transactions while enforcing rules on stakers. After transitioning to PoS, Ethereum will be able to confirm transaction finality within seconds and effectively prevent double-spending attacks.
The new virtual machine allows developers to create their own execution environments. This enables the implementation of rules from other blockchains, such as BTC or Zcash. As a result, Ethereum can become a universal framework for various blockchains.
These three technologies together form a powerful combination. Currently, no fully sharded blockchain exists, and PoS remains controversial among many. Ethereum is pioneering efforts to overcome major hurdles in blockchain development, aiming to establish a framework that removes central bottlenecks while preserving the balance of the blockchain "impossible trilemma."
Phase 0: The Beacon Chain
At the heart of Ethereum 2.0 lies the beacon chain. Initially, the beacon chain coordinates up to 64 shard chains. Chromatic Capital describes the beacon chain as the "command and control center" of the entire Ethereum 2.0 network.
The beacon chain manages the "Casper proof-of-stake" protocol. It records validators and their stakes, randomly selects block proposers, and assigns them to specific shard chains. It enforces consensus rules and penalizes dishonest validators, serving as a linking hub between shards.
In proof-of-stake voting, Ethereum 2.0 validators use their tokens to vote on so-called "attestations." Once a block on a shard chain accumulates enough attestations, it receives a "crosslink" on the beacon chain. From that moment onward, the block is finalized—meaning it cannot be reversed. At this point, the shard chain block achieves the same level of security as the beacon chain (i.e., the main chain).
In return, validators receive ETH2—the native coin on the beacon chain. In the long term, ETH2 will replace ETH entirely, with no issuance cap, ensuring long-term block security.
The beacon chain is scheduled to launch in the second or third quarter of 2020—marking Phase 0. At that time, users can run a beacon client and send their ether (ETH1) to the beacon chain, where it will be converted into ETH2. This conversion is one-way only, meaning ETH1 is effectively burned.
If Phase 0 succeeds, there will temporarily exist two Ethers: eth1 and eth2. For users, eth2 will have little practical value at first, since no functional shard chains will yet be linked to it. It will essentially be a skeleton without a body.
Phase 1: Shard Chains
Starting around 2021, the first batch of shard chains will go live. Initially, these shard chains will store raw data only. They won't process data according to consensus rules or display user account balances—they'll serve mainly to test shard chain architecture or store data to help dapps scale better.
The focus of Phase 1 remains on the beacon chain: the beacon chain begins referencing the state of shard chains via crosslinks, finalizing their states. You can think of the beacon chain as the central blockchain, with non-functional shard chains orbiting it and continuously interacting with it.
During this phase, Ethereum will build and operate a new proof-of-stake system, setting up the beacon chain as the control center for various data chains—a massive technical challenge.
Throughout this phase, the eth1 and eth2 chains will continue to run in parallel. Starting from Phase 2, things begin to get exciting.
Phase 2: Realizing the Vision
According to the roadmap, during the phase that "realizes the true vision of ETH2," shard chains will begin processing transactions and the ETH2 network will support real-world applications. In subsequent steps, smart contracts will be activated on shard chains. New execution environments will emerge, allowing shard chains to implement their own rules—for instance, adopting the rules of Bitcoin, Zcash, or ETH1.
Chromatic Capital explains:
“Just as ETH1 broke away from Bitcoin to enable on-chain smart contracts, ETH will now break away from ETH1 to redefine the essence of blockchain computing.”
Phase 2 will integrate the functionalities of all chains. Shard chains, previously used purely for data storage, will evolve into structural chains that connect smart contract states with the consensus process. Developers will be able to build their own DApps on individual shards, transforming Ethereum into a multi-chain system controlled by the beacon chain.
Phase 2 is expected to be achieved by late 2021 or early 2022. However, according to the roadmap, many aspects of Phase 2—such as the concept of execution environments—are still under active research and development.
Phases 3–6
As planned, Ethereum 2.0 will roll out in six phases. However, according to the roadmap, starting from Phase 3, “any prediction is speculative, and plans are likely to change.” In Phase 3, ETH1 might cease to exist. If ETH1 does eventually phase out and ETH2 fully replaces it, all ether and users will gradually migrate from eth1 to eth2—but this remains uncertain.
Ethereum’s GitHub Wiki outlines four still-undefined future phases:
Phase 3: Light Client State Protocol
Clients become extremely lightweight to reduce the size of Ethereum state stored per node, though state is not completely eliminated.
Phase 4: Cross-Chain Transaction Sending
This defines how transactions are sent across shard chains.
Phase 5: Tight Coupling with Main Chain Security
Phase 6: Exponential Sharding
Shards contain shards—individual shard chains become beacon chains for future sharding layers.
More specific details about these phases have not yet been released. When they are, high-level research papers and online discussions will likely follow. The exact form of ETH2 has not yet been clearly defined, so conservative estimates suggest completing Serenity will take 4–5 years.
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