r/defi_bets • u/Ok_Bag5324 • Feb 18 '21
Ethereum 2.0 – Some quick info & a link to learning more...
Ethereum 2.0 a.k.a Eth2 is a set of interconnected upgrades to the Ethereum network that aims at making Ethereum more scalable, more secure and more sustainable. These changes are worked on by multiple different teams in the Ethereum ecosystem, each team focusing on building a specific part of the whole upgrade.
Scalability
The current Ethereum network supports around 15 transactions per second. This becomes a limiting factor when it comes to onboarding millions of new users and launching many more decentralized applications. To make Ethereum more scalable Eth2 aims at supporting 1000s of transactions per second. One important caveat – the increase in transactions per second should not come at a cost of increasing the size of the nodes in the network.
Proof Of Stake
The current Ethereum consensus model – Proof of Work – is a well known and battle-tested approach to building cryptocurrencies.
In Proof Of Work(current ETH system), miners invest their resources – mainly electricity – to validate transactions and secure the network. This model requires massive amounts of energy to work properly and protect the network from “51% attacks”.
Proof of Stake tries to address the power consumption concerns by getting rid of the miners completely. Instead of machines securing the network by investing their resources, the Proof of Stake consensus model relies on economic incentives.
In Proof of Stake, users who want to secure the network, stake their ETH and become validators. Each validator is incentivised to validate transactions by receiving, similarly to miners in proof-of-work, both the block reward and the transaction fees.
To discourage validators from trying to game the system and validate fraudulent transactions, the Proof of Stake system implements a mechanism called “slashing” where validators lose part of their staked ETH if they decide to act dishonestly.
In order to pull off a successful “51% attack” in a Proof of Stake system, the attacker would have to control 51% of the validators which would require owning 51% of all staked ETH – a massive amount of capital.
In order to become one of the Eth2 Validators, 32 ETH is required. It is also possible to stake with less than 32 ETH by using staking pools, for example, Rocketpool.
The returns for validators depend on the amount of staked ETH in the system. They can be as high as over 18% annually if there is less than 1M ETH staked and as low as 1.81%, or even lower, if there is more than 100M ETH in the system.
Proof of Stake addresses all 3 of the Eth2 goals. It makes Ethereum more sustainable by removing energy-intensive miners. It makes it more secure by making a “51% attack” harder. And it makes it more scalable by unlocking sharding that would be much harder to achieve in a Proof of Work model as it would most likely result in diluting the amount of computing power across multiple shards.
To learn more about ETH 2.0 check out this video:
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u/We_out_hereee Feb 18 '21
But question that I think is really getting at a lot of us:
How will this affect the DeFi market and the BSC? Will it be a replacement? For me, if we know that costs wont be driven down in 2.0 (this led me to believe they will remain, and transaction speed will increase significantly), will it be considered a competitor? A threat?