Huobi Global, a leading digital asset exchange, claims that when it comes to the blockchain and crypto sector, there are “arguably no blockchain projects more important than Ethereum.” The second-largest digital currency by market cap has also been credited with being “the mother of ‘Generation 2’ for blockchains” as it launched smart contracts and also introduced the notion of a “World Computer,” the Huobi team noted.
The exchange’s management states that “the potential and possibility” that Ethereum (ETH) introduced to the technology have been taken up by many other initiatives (like Zilliqa and Kadena). However, Huobi claims that Ethereum is still a key part of the “evolution of blockchain.”
Huobi confirmed that with the successful launch of Ethereum 2.0, the ETH2.0 Phase 0 Beacon Chain is “set for completion next year.” Notably, Ethereum 2.0 is a major system-wide update to Ethereum which involves a gradual transition from a proof of work based blockchain to a proof of stake based DLT network. According to Huobi, these updates are geared toward “kicking off the major upgrade for Ethereum in order for it to attempt to reach its goal of being a ‘World Computer.’”
The exchange added that the people who’ve been following Ethereum since its inception may have seen or realized how far the project has come. However, crypto industry participants have also “picked up on the numerous shortfalls — including its scalability and the speed of its development,” Huobi confirmed. The digital assets firm added that “the hope is in Ethereum 2.0, via three important upgrades (The Casper Consensus, Sharding and eWASM Virtual Machine) this programmable blockchain will once again burst forward into the next evolution of blockchain technology.”
The Huobi team further noted:
“As with any technology, the prefix ‘2.0’ hints at a major upgrade to the previous version — and this is exactly what Ethereum 2.0 is. The blockchain has been created, realized the path of its potential, but not been able to reach that in its current form calling for major upgrades in its next step.”
Huobi also mentioned in a blog post:
“But, ETH 2.0 is regarded as building a new generation of Ethereum blockchain more than just upgrading the existing network. The important goal of ETH 2.0 is to complete the transformation of the consensus mechanism of the main network from Proof Of Work to Proof Of Stake; greatly improve the performance of the blockchain network with sharding technology, and improve the execution speed of the smart contract by advanced virtual machines.”
The Huobi team acknowledges that the most significant change is the in consensus mechanism, however, this isn’t a decision that was “taken lightly or quickly” as the co-founder of Ethereum, Vitalik Buterin, has reportedly been studying and planning the switch of Ethereum to PoS network back in 2015, and had officially introduced the ETH 2.0 plan during a speech he delivered while attending the Devcon 4 Conference back in 2018.
The Huobi team claims that “already we have seen important hard fork phases such as Frontier, Homestead, Metropolis Byzantium, and Metropolis Constantinople to prepare for the final Serenity PoS network upgrade.”
The exchange also mentioned:
“But why change from (Ethereum’s proof of work) PoW — the same consensus mechanism that Bitcoin uses — to PoS? To begin, Ethereum’s Ethash PoW mining algorithm ensured the authority and non-tamperability of block data, but it also sacrificed the transaction throughput and scalability of the network. Any transaction requires all nodes to spend computing resources to hash, which is the ‘common fault’ of all blockchain projects with PoW as the consensus mechanism.”
Huobi further explained that the current transaction processing times on the Ethereum mainnet is still between 15–20 TPS, meanwhile, most so-called Ethereum competitors like EOS and Tron have not used PoW consensus algorithm, allowing them to surpass Ethereum when purely measuring performance based on TPS rate.
According to Huobi, for Ethereum to achieve its goal of truly being considered the “World Computer,” there’s no way it can maintain the 15–20 TPS rate – which is why the gradual transition to The Casper Consensus has “become necessary.”
Huobi pointed out that the other major updates that will come with this blockchain consensus protocol change include using sharding to assist with both scaling and performance, while introducing a different type of virtual machine eWASM. Huobi claims that many experts believe that eWASM will assist with developing an ecosystem that’s not only fast, but also scalable, and more “flexible.” This may give crypto and DLT developers the confidence to create more complex smart contracts on top of Ethereum 2.0.
“Ethereum 2.0 is … more of an evolution. We have also understood the need for the changes that are going to be implemented. … this is not an overnight process, and the completion of Ethereum 2.0 will not be rapid either. There is a lot of work that needs to happen to make this new implementation happen.”
For example, Ethereum 1.0 is just a single main (block) chain that is tasked with processing all transaction data of the DLT network. All computing nodes taking part in the network have to handle the transactions in order (which includes the transactions involving smart contracts).
As explained by Huobi, the processing order is “completely packaged in blocks and then serially processed.” The exchange also noted that “the final node reaches a consensus but the process efficiency is low.”
Beginning with ETH 2.0, Ethereum will “establish a three-layer network structure,” which includes the existing PoW Main Chain, Beacon Chain, and Sharding Chain. It will also “incorporate a new cryptocurrency, called BETH that will have to coexist with ETH for some time,” the exchange confirmed.
Huobi added that this is part of the reason why Ethereum 2.0 is “taking this process in phases, and it starts with Phase 0,” which is the initial phase of the Ethereum 2.0 launch. The digital assets firm further noted that this will “release the proof-of-stake network, which will come online this year.” This will “see ETH 2.0 begin as an independent PoS network with the additional phases: sharding, eWASM, and the direction of subsequent continuous innovation, still being dynamically formulated,” Huobi explained.
The crypto-asset exchange also noted:
“[Ethereum’s] Beacon Chain will be launched in Serenity Phase 0. The Beacon Chain is the one that will be based on PoS. At this stage, the Beacon Chain PoS anchors the current PoW main chain, registers the verifier management contract on the main chain, manages the security deposit pledge of the verification node, verification node addition, and election. The main work of the Beacon Chain network stage is to launch Casper PoS consensus. At Phase 0, ETH2.0 is not equipped with sharding technology and smart contracts, so it does not support on-chain transfers.”
Huobi claims that there’s “no getting away from the fact that Ethereum is looking to undertake an ambitious upgrade with Ethereum 2.0.” The exchange acknowledges that “technologically, it makes a lot of sense and looks to be pushing Ethereum in the direction to reach its goal, but only time will tell.”