Overview of Ethereum 2.0

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TL;DR; Ethereum 2.0 is a new PoS chain that introduces sharding and eWASM as new features (=scalability & performance). ETH1 will be migrated to ETH2, at which point the long-planned transition from PoW to PoS will be complete.

The roadmap for updating to the new chain is divided into three phases, each of which presents an upgrade compared to the current chain: Phase 0 — Beacon Chain (PoS), Phase 1 — Sharding Phase 2 — eWASM

Why PoS?

PoS replaces the need run specialized hardware (& spend electricity) to validate txs. In PoW, dishonest actors lose tx fees. In PoS, they lose tx fees & stake. PoS is also a prerequisite for sharding. The migration has been planned since the early days of Ethereum

Phase 0 — Beacon Chain

Is the new PoS chain to which all the shards connect to. ETH1 tokenholders can move their tokens to the Beacon Chain and start validating (required stake: 32 ETH). For early validators on the new chain, the suggested inflation rewards are substantial.

Why Sharding?

Sharding increases tx throughput with parallel processing. Data is stored and transactions executed on a specific shard by a smaller group of validators, instead of each validator storing the entire state and processing all transactions.

Phase 1 — Sharding

Ethereum 2.0 will introduce 64 individual shard chains (recently downgraded from 1,024) with the option to add more. Periodically, the current state of each shard is recorded in a Beacon Chain block. Shard validators attest to the shard’s contents & state.

Why eWASM?

Wasm is a new fast, efficient and portable format standard for executable programs. eWASM is a subset used for Ethereum contracts. eWASM uses hardware capabilities to execute programs faster. Developers can use familiar languages (eg. Rust/C++) and tools & libraries.

Phase 2 — eWASM

eWASM replaces Ethereum’s current virtual machine (EVM). Existing Solidity contracts will be compatible with eWASM. Only once eWASM is launched, smart contracts will be able to execute on ETH2.

Beyond Phase 2

Improved support in the VM for STARKs to further improve scalability and privacy. Because cross-shard transactions are asynchronous (slow), further work on transacting between shards will need to be done (such as L2 solutions that work across shards).

In short, only after phase 2 will Ethereum 2.0 be fully functional. Phase 0, only staking will be enabled (Q2 2020). Phase 1, data can be stored on shards but no txns executed (Q1 2021). Phase 2, smart contracts can be executed (2022).

Deprecating ETH1

There will be two different ether tokens during the transition. The original plan was to roll the PoW state into one of the shards. According to a new plan ETH1 is transferred to its own shard but now without PoW (miners replaced with ETH2 validators).

Validation on ETH2

The only requirement for validating is to stake 32 ETH. Anyone can join, and a minimum of 100 validators are randomly selected to produce blocks. This is different from e.g. Polkadot, where validators are nominated by token holders.


Ethereum 2.0 continues with off-chain governance. Why? In Vitalik’s view, explicit governance design is difficult and a bad implementation creates unexpected issues. On-chain governance also has practical problems like low voter turnout.

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