Ethereum 2.0 genesis set for December 1st

Ethereum 2.0, also referred to as ETH 2.0 or Serenity, is an updated version of the existing Ethereum blockchain that is designed to address the network’s limitations while still maintaining its integrity as a decentralized blockchain.

The most well documented of these limitations is a lack of scalability. Blockchains like Ethereum face scaling challenges because every node in the network has to verify and execute every transaction. The Beacon Chain signals a key moment in Ethereum’s history where it begins a major upgrade to address these issues. The core infrastructure changes set to be implemented in ETH2.0 are a switch from a proof-of-work (PoW) consensus model to a proof-of-stake (PoS) system and the introduction of sharding, a process which horizontally partitions a database into parallel channels that work synchronously.

Beacon chain to launch on December 1st

The launch was set after 524,288 Ether (ETH), the minimum necessary threshold required for the viable deployment ETH2.0’s beacon chain, was sent to the ETH 2.0 deposit contract. The genesis will now occur on the earliest possible start date, with the deposit requirement hit roughly 9 hours before the deadline. Transfers into the deposit contract went live on November 4 and it is set to launch with over 20,000 validators, well over the 16,384 threshold needed for sufficient ETH 2.0 decentralization.

Source: https://www.duneanalytics.com/hagaetc/eth2-0-deposits

Initially, it appeared as though the launch might be delayed. 108,000 ETH or just 20% of the required ETH needed to meet the launch threshold sat in the deposit contract on November 20th. This created concerns about low staker participation. A surge in deposits over the last two days, with the last 25% of ETH (~131,000 ETH) needed to trigger the contract dropping in just 4 hours, however, ensured the deadline would be met with time to spare. Deposits into the contract have continued to grow post the threshold being met with the counter now at 700,224 ETH which equates to a value of USD 422,577,225.

Source: https://www.duneanalytics.com/hagaetc/eth2-0-deposits

Depositors who participate in the genesis will not be able to withdraw their staked Ether until Ethereum 2.0 reaches Phase 1.5. This is a transition that will see the Ethereum 1.0 chain merge with the beacon chain as a shard. Phase 1.5 is expected to launch in 2021 after Phase 1 and will tie depositors into committing to the Ethereum network for a significant period of time.

The minimum entry requirement to become an ETH validator is 32 ETH. Presently the exact size of the annual reward to ETH stakers is unknown but the project’s roadmap suggests the value will vary from 1.56% to 18.1% and will be inversely related to the number of validators, so a bigger network means fewer rewards. While this is less than can be earned from staking from some of the newer Decentralized Finance (DeFi) protocols, it is likely to be much more secure and trustable.

ETH 2.0 and the significance of the beacon chain

Currently, the Ethereum blockchain can only manage a maximum of 15 transactions per second. This limited throughput has frequently led to network congestion whenever there is a pickup in demand to use the network, such as during the 2020 “summer of defi” boom. The congestion affects users in the form of long wait times and high fees for transactions. Ethereum 2.0 is designed to support up to 10,000 transactions per second.

On December 1st, the beacon chain will launch. It has been described as the heartbeat of Ethereum 2.0. The beacon chain uses a proof-of-stake consensus algorithm. In PoS users stake their assets as a security deposit to take part in the consensus protocol. Participants in the process are called validators and they are responsible for forming blocks on the network.

Validators are randomly selected to propose the next block, putting their tokens at stake to back its validity, the block is then verified by the rest of the validators and broadcast to the network. With PoS the heavy energy/processing power expenditure associated with PoW is replaced by economic incentives and game theory. The ‘mining process’ is made virtual removing the need for expensive and inefficient hardware, streamlining the process of approving transactions.

The Beacon Chain will first exist separately to the Ethereum mainnet that is used today but eventually, they will be connected. The plan is to “dock” the mainnet into the proof-of-stake system that’s controlled and coordinated by the Beacon Chain.

The introduction of shardchains will be the second ETH 2.0 upgrade. They will increase the capacity of the network and improves transaction speed by extending the network to 64 blockchain shards. Sharding enables scalability by splitting up the network’s transactional load across shards so that each node isn’t responsible for processing each transaction. The Beacon Chain will eventually also be responsible for randomly assigning stakers to validate shard chains. This is key to making it difficult for stakers to collude and take over a shard.

The community and traders rejoice

Key figures from the Ethereum community including the blockchain’s creator Vitalik Buterin, Anthony Sassano, and Evan Van Ness celebrated the confirmation of the beacon chain launch as a key event in Ethereum’s history. Eric Conner, builder of ethhub.io and host of Into the Ether podcast said on Twitter “The Ethereum community deserves this moment. If you want to invest in progress and innovation in crypto, pick ETH.”

David Hoffman founder of Bankless said “Congratulations #Ethereum! The Golden Age of Ethereum is upon us. Let’s get this network up and running.” Some responses were more emotional. Anett Rolikova Wave manager at Superfluid said about the launch. “We crossed the Magic Milestone. Congrats to the ETH 2.0 R&D Team for all the hard work done so far! Long road ahead, stay strong you got the support. Congrats to the Ethereum Community for being true believers and supporting the rise of the new decentralised financial system.”

Congratulations also came from the wider crypto community. Viktor Bunin, protocol specialist at Bison Trails, a blockchain infrastructure firm said “Congratulations everyone!!!!! So many years of effort by so many people. So much time and money invested. So many delays, setbacks, and critics. And yet here you all are. You’ve all earned this. Enjoy. Tom Shaughnessy Co-Founder of Crypto investment firm Delphi Digital said “ETH 2.0 launch got more attention in an hour than every other layer 1 did this entire year put together.”

In the lead-up to the eventual Beacon Chain genesis being confirmed the price of ETH rose steadily, peaking as the deposit contract threshold was crossed. The ETHUSD price on the ELX jumped from trading at USD522.91 on November 22nd to trading at USD616.78 on November 24th. The price of ETH has curtailed slightly since and currently trades at USD593.48