Ethereum Announces Major Upgrade – Ethereum 2.0
A multi-phase upgrade to the Ethereum blockchain, Ethereum 2.0, could allow thousands more transactions to take place on the network per second. It’s also expected to improve the security of the network, which may in turn help to close the gap in the current Bitcoin-dominated market. Find out what the ramifications are for token holders and traders.
What Is Ethereum 2.0?
Ethereum 2.0 (ETH2) is an upgrade to the Ethereum blockchain, which consists of the Ether digital token. Ether is the second-largest cryptocurrency in the world by market value. Since the start of 2020, the currency is up around 350%, recently hitting $600 for the first time since June 2018.
The long-delayed upgrade, which went live at 12:00 pm UTC on 1st December 2020, marks the first stage of the upgrade, known as Phase 0, or the Beacon Chain. The Beacon Chain is an interim blockchain which will run alongside the current network as it begins the first of four migration phases.
It also introduces a ‘proof-of-stake’ mechanism, which aims to solve some of the network’s scalability problems. Proof of stake means that a person can activate validator software by depositing ETH. This means they will become active participants in storing data, processing transactions and adding new blocks to the chain, earning more ETH in the process. As a result, this will help to secure the network in preparation for the next phase, known as Sharding.
What’s Next For ETH2?
Once the Beacon Chain has laid the groundwork, the next phase will introduce Shard chains, which will expand Ethereum’s capacity to process transactions. Sharding is the process of splitting a database horizontally to spread the load across 64 new chains. Stakers on the network will then be assigned shards to work on.
It is expected that the Shard chain phase will launch some time in 2021. The following phase, known as Docking, should take place in 2022 and will mark the end of proof-of-stake and full migration to Ethereum 2.0.
What Does The Upgrade Mean For Traders?
For traders who have invested in Ethereum and wish to hold or trade their coins on decentralised apps or platforms, no changes need to be made. You can continue using your chosen crypto exchange to buy and sell ETH or other currencies. Traders should, however, beware of scammers who may ask you to send ETH to exchange.
For traders who wish to participate in the new Ethereum network, you can find staking opportunities at major exchanges such as Coinbase. Note that you will need to deposit 32 ETH (worth around $19,000 at the time of writing) in order to become a full validator and earn a stake on the Ethereum chain. With that said, it is possible to stake less with some exchanges, including Binance.
The news will also provide opportunities for active day traders. The changes will likely affect the perceived value of Ethereum, providing significant opportunities for savvy market participants. Find out more about day trading Ethereum here.