Ethereum 2.0 laid its foundation in 2020. The year 2021 brought heightened expectations for the future of this smart contract platform.
Ethereum has consistently followed its roadmap toward a continuous evolution into a proof-of-stake consensus protocol, solidifying the groundwork for Eth2 in 2020. As the world’s second-largest cryptocurrency by market capitalization, Ether (ETH) supports a smart contract blockchain that has become a primary resource for developers building blockchain-based applications and tools.
The rise of decentralized finance (DeFi) is largely built upon the Ethereum blockchain, adding credibility to the platform’s decentralized functionalities. However, the surge in blockchain usage has come at a cost—increased network congestion and higher transaction fees as more users and platforms join the Ethereum ecosystem. This challenge is a key driver behind the ongoing transition to Ethereum 2.0.
Amid the shift to Eth2, there is considerable optimism and excitement within the community. As a new year unfolds, many are looking forward to the next major developments. So, what are the primary hopes for Ethereum’s evolution in 2021?
Understanding Ethereum 2.0
Ethereum 2.0 represents the next phase in the blockchain’s transition from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus algorithm. This shift is integral to enhancing the scalability, security, and sustainability of the Ethereum network. The goal is to support thousands of transactions per second, enabling faster and more affordable applications.
Security remains a top priority. The move to proof-of-stake is designed to make the protocol more resilient against various forms of attacks. Additionally, transitioning from PoW to PoS is essential for reducing the environmental impact of the Ethereum network, which currently requires substantial computational power and electricity to remain sustainable.
The Beacon Chain Launch
The first phase of Eth2 introduced the Beacon Chain, which brought PoS into the protocol. Launched on December 1, 2020, it allows users to stake ETH and become validators of the network. To become a full validator, users must stake 32 ETH. These validators process transactions and create new blocks on the chain, paving the way for a more energy-efficient consensus mechanism to replace the current PoW model.
With the Beacon Chain active, the next step involves the rollout of shard chains, expected sometime this year. Sharding splits the database to distribute workload, reducing network congestion and increasing transaction speed. It also lowers the hardware requirements for running nodes. The plan is to create 64 shard chains.
The Beacon Chain will eventually assign certain validators to specific shard chains, decentralizing the work required to validate the Ethereum blockchain. The initial iterations of these shard chains won’t process transactions but will store and manage data on the network.
The long-term goal is to combine sharding with rollups—a technique that bundles off-chain transactions before submitting them back to the mainnet. This integration is expected to significantly boost Ethereum’s transaction processing capabilities.
Staking ETH: A Vote of Confidence
The amount of ETH staked in the Beacon Chain contract is a major focus of the ongoing transition. Ben Edgington, lead product owner of Teku—an Eth2 client created by ConsenSys for enterprises and institutional investors—shared his insights with Cointelegraph. He noted that the community’s willingness to participate in staking is a highly positive signal for developers:
“The amount of ETH staked is a huge vote of confidence, not only in the Beacon Chain but in the future of Ethereum. I’ve been impressed by how quickly so much value has flowed in, and it’s encouraging to see the Ethereum community’s commitment to what we’ve built and continue to build.”
Edgington added that the Beacon Chain launch was arguably the most challenging part of the Eth2 project and serves as a major milestone, boosting confidence in Ethereum’s future phases.
Viktor Bunin, a protocol expert at blockchain infrastructure provider Bison Trails, told Cointelegraph that the ongoing ETH staking demonstrates strong community support for the future of the Ethereum protocol. He stated:
“I’ve been surprised by the consistent inflow, and I believe the queue to join Eth2 might not dry up throughout all of 2021. This means there will always be validators waiting to join the Ethereum network, as many are trying to enter simultaneously.”
High Hopes from Ethereum Leaders
In early December 2020, ConsenSys founder Joseph Lubin suggested that the transition to the next phase of Eth2 might happen faster than expected, given the Beacon Chain’s successful launch. Speaking at the Enterprise Ethereum Alliance – Asia Pacific 2020 conference, Lubin stated:
“Those who understand the Ethereum ecosystem are very optimistic about how quickly things will progress, as the truly complex work was completed in Phase 0.”
Lubin added that the Ethereum Foundation expects sharding to greatly improve data availability on the blockchain once deployed. He even suggested that Eth2 could absorb Eth1 in the “near future.”
Ethereum co-founder Vitalik Buterin also shared his perspective on the ecosystem’s development during an online event hosted by Ethereum Buenos Aires on YouTube on December 29, 2020. He outlined key goals for the Ethereum ecosystem over the next 12 months, emphasizing the need to address high transaction costs on the current blockchain:
“We need to work very hard to ensure there’s more room for transactions, so we avoid a situation where everyone is bidding for a very small space, allowing only a few transactions to go through.”
Buterin noted that Ethereum aims to support hundreds of millions of users in the coming years. Currently, the blockchain can only process 15 to 45 transactions per second.
He also discussed the mid-term scalability roadmap, highlighting the potential of rollups to enable the network to handle 1,000 to 4,000 transactions per second. With the combined deployment of Eth2 sharding and rollups, Buterin believes Ethereum could eventually process 25,000 to 100,000 transactions per second.
In closing, Buterin expressed hope that by the end of 2021, the current development roadmap for both Eth1 (PoW) and Eth2 (PoS) chains would be complete. He also looks forward to running testnets for full integration and sharding functionality, adding:
“It’s possible that even before the merge, light-client support for the proof-of-stake chain could be used to provide better light-client support for the proof-of-work chain.”
Developer Confidence in the Process
A common theme among those involved in Ethereum’s evolution is the focus on quality over speed. Although timelines have been proposed, developers are more concerned with building and implementing upgrades that are not rushed.
Buterin told Cointelegraph that many Ethereum users, developers, and companies he has engaged with over the past few years were frustrated with the long lead-up to the Beacon Chain launch but were excited by the news of its rollout:
“They didn’t cut corners in the Phase 0 design and weren’t afraid to start over after failed attempts or new optimizations. They should and will continue to prioritize optimal design over execution speed.”
As Buterin mentioned in December 2020, the 2021 roadmap includes development goals for both Eth1 and Eth2. The latter involves work on shard chains, which are expected to improve the protocol’s scalability. Edgington stated that he hopes shard chains will be launched by the end of the year, though this depends on the scope of work to be completed in 2021:
“The design for sharding is quite advanced, and I hope we make excellent progress toward implementation this year. I personally hope to see shard chains launched in 2021, but there’s no concrete date yet. Additionally, we’ve already proposed merging Eth1 and Eth2 in the roadmap, so we’ll be working on that alongside sharding.”
There’s no denying the pressure to deliver these performance-enhancing upgrades in 2021. DeFi was a major theme in 2020 and has placed additional strain on the Ethereum blockchain. However, Edgington reiterated that the developer community isn’t taking this pressure lightly in the new year:
“There’s always been a sense of urgency, unrelated to DeFi! The tension between doing things right and doing them quickly always exists, but I feel we’re in a reasonable place now.”
Buterin also believes that the development of shard chains shouldn’t necessarily be accelerated, noting that the developers’ mindset is optimized for quality because they are “building financial infrastructure for the next century.” He added:
“I expect shard chains to launch by the end of 2021, but I’m also comfortable with delays if they occur.”
Frequently Asked Questions
What is Ethereum 2.0?
Ethereum 2.0 is a major upgrade to the Ethereum blockchain, transitioning it from proof-of-work to proof-of-stake. This aims to improve scalability, security, and sustainability, allowing the network to handle more transactions with lower fees and energy consumption.
How does staking work in Eth2?
To become a validator in Ethereum 2.0, users must stake 32 ETH. Validators are responsible for processing transactions and creating new blocks. In return, they earn rewards for helping secure the network.
What are shard chains?
Shard chains are smaller chains that split the Ethereum database to distribute workload. This reduces congestion and increases transaction speed. The initial shard chains will focus on data storage, with future versions expected to process transactions.
When will Eth2 be fully implemented?
The full rollout of Ethereum 2.0 is expected to take several years. The Beacon Chain launched in December 2020, with shard chains planned for 2021 and beyond. The merger of Eth1 and Eth2 is also part of the long-term roadmap.
How will Eth2 impact transaction fees?
By improving scalability and reducing network congestion, Eth2 is expected to lower transaction fees significantly. Techniques like sharding and rollups will increase throughput, making transactions faster and cheaper.
Can I unstake my ETH after staking?
Initially, staked ETH cannot be withdrawn until later phases of Eth2 are implemented. This is designed to ensure network security during the transition. Plans for withdrawal functionality are part of future upgrades.
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