Currently, Ethereum ranks as the second-largest crypto or blockchain. It is exceeded only by Bitcoin. For years, it has encountered scalability issues managing just 15 transactions every second. If all goes to plan, all these issues will end in the next three years. Ethereum is set to undergo its biggest facelift since inception.
Serenity will impact all blockchain layers enhancing security, scalability, and interoperability.
What does Ethereum 2.0 comprise of?
Vitalik Buterin presented the concept of this upgrade in 2018 but ConsenSys officially announced it with its roadmap in May 2019. It features several smaller upgrades to be implemented in the next 3 years. Its architecture will be broken up into 4 main components:
PoW Main Chain
The current Ethereum blockchain as we know it will remain in use as it is.
The chain is currently under development and will become the first component of Ethereum 2.0. It is the main coordination layer that will implement the Casper Consensus (PoS). Under Casper, miners will be replaced with Validators. All validators need to deposit a constant amount of ETH into the Validator Main Contract (VMC).
The contract will be stored on the main chain and checked often by Beacon chain to add new validators. The Validators are expected to function in random groups assigned to specific shards. Furthermore, regular reshuffling of every group will be done to minimize collusion risks like 51% attacks.
These will come after Beacon Chain and they will deal with scalability issues. Every shard will execute Smart Contracts and store their data performing similarly to a side chain structure. The shards will only execute transactions after the infrastructure and security are tested and confirmed. All account balances, ethereum addresses, and smart contract data will be divided among these shards.
Whenever any transaction is sent to the network it will end up in the shard that holds the address that signed the transaction. It will be executed and the validators assigned to the shard will include it in the next block. Thus, it is not mandatory for all validators to confirm the transaction which will increase the confirmation speed.
This layer makes up the final major component that will feature in the Ethereum 2.0 upgrade. It will provide for the execution of Transactions and Smart Contracts.
Since 2015, several Ethereum upgrades have come; Frontier (2015), Homestead (2016), Byzantium (2017), and Constantinople (2019). The last fork, Istanbul, is scheduled for October 2019.
It currently consists of 30 proposed EIPS, including the controversial and famous EIP 1057 [ProgPoW]. This EIP is designed to eliminate the advantage that Application Specific Integrated Circuits (ASICs) have over other mining hardware. ASICs work with only one hashing algorithm.
ASICs are inefficient in the long-term since they can easily become obsolete if a hash is changed like what is planned for Ethereum. They are also quite expensive and hard to get which results in a more centralized network than desired.
Although ProgPoW will let ASICs operate, it will remove the advantage they have in performance. Thus, they will become less cost-effective than general-purpose GPUs.
The first of the four phases will get implemented after the network becomes ready to initiate Serenity.
Phase 0: Beacon Chain – 2019
The phase will see through the roll-out of the Beacon Chain that is the Proof of Stake blockchain expected to oversee and organize the validator network. To avoid disruptions to the continuity of chains, it will run alongside the current PoW blockchain. Its main responsibilities will be processing Crosslinks, managing the proof of stake mechanism, and directing consensus and finality.
Beacon Chain offers finality via PoS and Casper FFG. PoS dictate that 67% of validators must stake ETH on the next block. Thus, the financial incentive is riskier for the potential malicious actors. The idea for the beacon chain came from a consensus protocol adopted by Dfinity blockchain project.
Phase 1: Shard Chains – 2021
Serenity’s shard structure will split the responsibility for data processing of a database across multiple nodes. Thus, the parallel processing of multiple transactions is possible while simultaneously storing and processing information implemented by multiple shards. That is an improvement from the current Ethereum blockchain that needs each node to process and validate every transaction in a linear process.
In this phase, the focus will be on consensus and finality on the shards instead of the full release of shard functionality and it could be treated as a ‘test run.’ The block time is 16 seconds; validators will have to stake 32 ETH while every shard will have 128 validators. 1024 shards will be supported with the minimum exit notice for validators set at 97 days.
Phase 2: eWASM – 2021/2021
In this phase, the new Virtual Machine will be introduced. The current EVM will be replaced by the brand new Ethereum-flavoured Web Assembly (eWASM). The shard chains will evolve to become fully functional enabling the scaling of the Ethereum network. Once eWASM is released, ethereum will theoretically support the execution of Smart Contracts written in any language. For now, only Smart Contracts written in Solidaroty are supported.
Phase 3: Continued Improvement – 2022
After phase 2, the Ethereum timeline starts to become less specific. But developers are expected to work on any pressing matters that will arise with time to enhance the protocol to meet the growing blockchain technology demands. Coupling with mainchain security, light client state protocol, and super-quadratic or exponential sharding are among the continued improvements being discussed.
Please note that the current PoW Ethereum blockchain will remain fully functional running alongside the Beacon Chain. At the end of these phases, the current platform will be assessed to determine whether it has become ‘computationally’ obsolete.
What does it mean for aelf?
The upgrade will have very little effect on aelf as a business and the technology since the targeted clients for the aelf blockchain are different from those of Ethereum. Most of the enterprises seeking to develop on aelf will need private or hybrid blockchains except customizability. That is technically impossible with Ethereum now and in the near future.
Even though Ethereum will introduce sharding for the data processing performance enhancement, it will remain to operate as one blockchain. It will have limited customizability prohibiting users from creating private or hybrid chains. Thus, Ehtereum upgrades will not directly affect the market aelf is focused on.
In fact, the only impact will be positive in general since it will increase mass adoption and enlighten the public mindset on blockchain benefits. Also, Ethereum’s scalability will not achieve considerable improvement until 2021. It is anticipated that in 2021 Ethereum will manage to increase performance to almost 15,000 TPS which aelf achieved in their testnet in 2018. Thus, Ethereum is almost three years behind.
Serenity has the ability to parallel process with the eWASM allowing smart contracts in multiple languages to be built on Ethereum. That feature was not introduced on aelf in 2018 although language-agnostic functionality is scheduled for after their mainnet launch. Moreover, aelf will enable any consensus protocol and the selection of a private, public or hybrid blockchain setup.
Therefore, aelf and Ethereum are different products that target different audiences. Ethereum has leveraged off the ‘first mover’ advantage for some time now. However, that may soon change. Even if the audience will be the same by the time Serenity is completed, aelf will already have launched a fully functioning testnet and had it running successfully for years. Thus, their advantage will turn into catch-up.