I wanted to contact you with an important update on the rollout of Ethereum 2.0.
Ethereum recently conducted a successful “merge” test as it prepares to launch a massive network upgrade that’s colloquially known as Ethereum 2.0, or ETH 2.0.
I won’t weigh down your Thursday with all the technical details, but this successful test means that the world’s #2 crypto has taken a big step toward releasing its new version.
This upgrade promises to increase Ethereum network speeds to 100,000 transactions per second from about 15 to 17 per second now, and to drop transaction costs to less than a penny from tens and even hundreds of dollars.
So when will Ethereum 2.0 finally go live? As you probably know, Ethereum 2.0 was originally slated for between May and June.
However, early this week, several of my contacts inside crypto companies I advise told me ETH 2.0’s rollout would be delayed. And, on Tuesday, Tim Beiko, one of the core developers for the Ethereum Foundation, confirmed this when he tweeted that the timeline has been pushed back a few months.
We don’t yet have a new date for the ETH 2.0 rollout, though Beiko suggested it would likely occur in fall.
A short delay like this was always possible given that the upgrade is one of the biggest and most complex crypto projects ever undertaken.
Ethereum is the key network in the cryptoconomy. Many of the world’s most popular cryptocurrencies, decentralized finance (DeFi) applications, and non-fungible token, or NFT, projects run on this network.
This leap to 2.0 will mark a crucial step forward for the cryptosphere and will allow blockchain-based services to replace many traditional businesses across our economy, particularly those in the financial sector.
The upgrade will be accomplished by moving Ethereum away from something called “proof of work,” or PoW.
Under PoW, transactions on the Ethereum network are validated by energy-hungry computers competing to solve complex math equations. When a computer solves an equation, it’s rewarded with some Ethereum. This process—called “mining”—is effective, but slow.
Under the ETH 2.0 updates, Ethereum would move from proof of work to “proof of stake.”
With proof of stake, participants who want to validate transactions simply need to “stake,” or deposit, Ethereum tokens on the network. Those “validators” then compete for the right to verify transactions on the blockchain, and earn some Ethereum for doing so.
But because they don’t have to compete to solve complex math problems, the process is significantly faster and uses 99.95% less electricity.
Ethereum has already implemented proof of stake on a limited basis with the launch in late 2020 of the first stage of the Ethereum 2.0 project: The Beacon Chain.
The crucial phase of ETH 2.0 is merging this chain with the main Ethereum network. Once they are merged, proof of stake can fully replace proof of work.
That’s why the successful merge test I mentioned at the outset is such a big deal.
Ethereum has now verified that the merge is possible…meaning a full rollout of Ethereum 2.0 is just a matter of time.
In the face of this positive news, a short delay to the timeline is inconsequential, and doesn’t change the Ethereum story.
Ethereum will remain the cryptoconomy’s primary workhorse for lots of services including DeFi and NFTs. And once this speed upgrade is launched later this year, we will see these services spread across the traditional economy.
I will keep you updated on the upgrade schedule as news emerges.
