Q & A

How does Ethereum 2.0 work?

Research / Rémy Roy Oct 7, 2020 1 Answer

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Ethereum 2.0 is centered around the idea of a Beacon chain that synchronizes multiple Ethereum chains, which are referred to as shards.

This approach to solving the "scaling problem" [Increasing the throughput of data on the network] preserves the decentralized, trustless nature of the Ethereum blockchain while drastically increasing the throughput of the network as new "shards" are added to the network and synchronized by the beacon chain.

The beacon chain's primary function is merely the synchronization and consensus of the states of the various shard chains underneath it through a proof of stake [as opposed to proof of work in the original Eth blockchain design] consensus algorithm.

Ethereum 2.0 is planned to launch in multiple phases -
In phase 0: The Beacon chain is launched and layer 1 ETH [The current ethereum network's native token] is burned to mint ETH on Layer 2 [The beacon chain]. This ETH is staked with validators: 32 ETH per validator, and they begin the proof of stake consensus of the Beacon chain, which at this point will not actually do much else.

In phase 1: Layer 1 is incorporated as a shard under the beacon chain and other shards are tentatively added to test and develop sharding logic. At some point during this phase mining rewards will begin to be scaled down and confidence in the sharding logic will eventually progress to the point that the network moves to phase 2 [final implementation] of Ethereum 2.0.

Phase 2: The shard chains begin to interoperate through the beacon chain and consensus is achieved across all shards. Throughput is massively increased, transaction fees decline a lot, the network becomes less congested, and mass adoption becomes truly possible for Ethereum.

Of course, all of this is highly simplified and I encourage you to view this source for further reading about the technicalities of the different phases to get a good grasp on how it all works: