What is Ethereum?
Lauched by Vitalik Buterin in 2015, the co-founder of Ethereum blockchain. Ethereum is an open-source platform for builders to launch decentralized applications, smart contracts, shared ledgers, and other financial and legal applications. The platform is completely decentralized free from the scrutiny of middlemen, one of the prerequisites of any good blockchain network. Ethereum has occupied the number #2 spot in market value just after Bitcoin.
Ethereum (PoW) Vs Ethereum2.0 (PoS)
The Ethereum blockchain was built on the Proof-of-Work (PoW) consensus mechanism. The PoW was first introduced by Satoshi Nakamoto, the man behind the creation of Bitcoin blockchain.
Ethereum 2.0:
The Ethereum creators are now shifting towards Proof-of-Stake (PoS) consensus protocol. This transition has raised quite a few controversies in the blockchain community.
PoW involves mathematical computations to create new nodes in the blockchain. This process is called mining. In return, the miners get rewards in the form of “Ether”. But the process can be quite costly and involves the use of huge volumes of computational power and electricity. As the miner solves the mathematical puzzle, a block is generated in the network. After the final validation of the block, the miner is rewarded for his successful venture.
Problem With Cost and Scalability
Back in 2008, Satoshi Nakamoto implemented this process through the Bitcoin blockchain and since then many similar blockchain networks have been using this process to reward their miners. But over the years, the blockchain developers have experienced a few drawbacks in the traditional method of generating blocks. The process is not only lengthy but lacks scalability, is costly, and exhausts a lot of computation power and electricity.
51% Attack: To tamper the process, the attacker needs to outrun the total stake of all the validators in the network that is 51%, which is practically impossible.
To answer this problem, developers came out with the Proof-of-Stake consensus mechanism that they believe will solve all the problems that the blockchain community is facing today.
Casper Protocol [Moving PoW to PoS]
Ethereum has chosen to go with the Casper PoS protocol. The version of Casper is going to be implemented first is the hybrid PoW/PoS consensus which is designed to make a smooth transition into PoS. Blocks are going to be mined with PoW where every 50th block is a PoS checkpoint. This method replaces the miners with validators. To arrive at a consensus, the validators are given voting power to validate the next accepted block. The voting power of each validator depends on the amount of stake he/she holds in the network or the amount of Ether he holds in his account.
As we know, in PoW The attacker needs to hold 51% of the total hashing power, while in PoS, it is 51% of the total Ethereum coins in the network. So, PoS is a far more developed consensus protocol compared to PoW. PoS consumes low electricity and computational energy than PoW. It is more scalable and since the entire consensus depends on the amount of stake of the shareholders, it is far more secure than PoW.
Ethereum2.0: Beyond Just Proof-of-Stake
The Ethereum 2.0 has moved a step forward from proof-of-stake in the Ethereum blockchain. It includes the additional features of:
- Sharding – It is a form of data partitioning where large databases are kept in small manageable resources.
- eWASM – Ethereum Web Assembly (eWASM) helps in faster execution of the codes.
- Plasma and Raiden – Scaling solutions that can handle large volumes of transactions.
The Ethereum Developer Community will be introducing new features on the Ethereum 2.0 network in the future. They are hopeful that this will speed up transactions, increase the implementation of smart contracts, and also bring in new investors in the network. However, though most of the technological developments including the implementation of the hard fork has been successful, there have been controversies regarding the development of PoS consensus in the Ethereum2.0 network. Many investors are worried about the efficacy of the network.