Ethereum 2.0 Upgrade Explained (Beacon Chain, Shard Chains, Proof of Stake)
4 min read · · Korean original
Contents 4
Ethereum 2.0 is set to launch soon. It will bring in concepts like proof of stake, shard chains, and the beacon chain. I'll explain what they mean as simply as I can. First, here are the key changes Ethereum 2.0 will bring:
- Faster transactions
- Lower gas fees
- Earning income through staking
Ethereum 2.0 Fully Explained
To sum up Ethereum 2.0 in one sentence, it's about becoming faster and more efficient. To understand how, you need to know three concepts: proof of stake, shard chains, and the beacon chain.
1. The Switch from Proof of Work to Proof of Stake
I'm sure you already know that a blockchain is a ledger that links many transactions together into one long, complete list. Right now, Ethereum creates blocks and updates its ledger using the same method as Bitcoin, called proof of work. Proof of work is more secure than proof of stake, but its downsides are that it uses a lot of resources and is slow.
For a platform like Ethereum that has to process a huge number of transactions, speed and resource efficiency matter. How would you feel if a single transaction cost you KRW 30,000 in fees? In fact, when traffic surged on the Ethereum network, fees sometimes went even higher than that.
Ethereum 2.0 will scrap the existing proof of work and introduce proof of stake to process transactions faster. Here, proof of stake means staking ether (ETH) to take part in securing and maintaining the network. This is the first key change.
Then, just as miners used to earn rewards for mining blocks and protecting the network, proof of stake participants should get rewards too, right? These are called staking rewards, and you can currently take part in Ethereum 2.0 on Binance. By doing so, you can earn around 4% a year in ETH as interest.
2. The Launch of Shard Chains
The second major change in Ethereum 2.0 is the introduction of shard chains. Shard chains are easy to grasp once you understand the term. A shard means a fragment or a piece. Right now, every node on the network has to store transactions from A to Z, but once shard chains are introduced, each node only needs to hold part of them.
In other words, since each node can carry a smaller ledger than before (the book it has to carry around gets thinner and lighter), everything becomes faster overall. Storing and processing only part of the transactions is exactly what the shard chain concept is about.
But this could raise concerns about the integrity of the blockchain, right? That's where the beacon chain comes in.
3. The Introduction of the Beacon Chain
The beacon chain is introduced to solve the problem with shard chains mentioned above. In other words, the beacon chain keeps the shards running in parallel in sync and maintains a complete blockchain.
The beacon chain acts as Ethereum's headquarters, letting each shard chain stay in sync by following the proof of stake mechanism. When validators taking part in staking vote with a majority of two-thirds or more, the beacon chain follows that vote to validate transactions.
What Ethereum Holders Need to Do
If you hold your ETH on a large centralized exchange like Binance or Upbit, there's nothing you need to do. All Ethereum funds will be carried over after the Merge and shown as ETH in your wallet.
However, Ethereum deposits and withdrawals may be temporarily suspended while the Merge is underway. So it's best to hold off on transactions during that time.
An Upcoming Fork and a Warning About Scams
Ahead of Ethereum's switch to proof of stake, some miners are currently discussing a fork of the proof of work chain. That's because they want to airdrop coins to themselves and keep earning for as long as possible while they still have their mining equipment.
As a result, various related coins may spin off before and after the Ethereum 2.0 upgrade. Watch out for scammers who ask you to buy an "ETH2" token to "complete the upgrade" or to send funds to an unknown wallet address.
Ethereum 2.0 in a Nutshell
If the terms above are hard to follow, just remember this. Ethereum is a race car, and Ethereum 2.0 is the process of fitting it with a new, fast, high-efficiency engine. In other words, everything else stays the same, and only the inside of the race car changes. With Ethereum 2.0, it will become faster and more efficient than before.
That wraps up our look at Ethereum 2.0. If you found this post helpful, please tap the heart below and share it widely. Thank you!
