The highly anticipated release of Ethereum 2.0 was a major development in the cryptocurrency industry. Cointelegraph recently conducted research to find out if Ethereum can still defend its position as the premier network supporting decentralized finance.
This report dispels common misconceptions investors might have about Ethereum and provides a comparative analysis between Ethereum and its rivals. At the beginning of the year, the Ethereum foundation changed the name of the Eth2 project. Does it try to educate or manage expectations?
There is new talk about execution layers and consensus
The Ethereum foundation published a blog in January stating that Eth1 and Eth2 have been abandoned by developers since late 2021. Eth1 will be referred to as the “execution layers” and Eth2 as the “consensus layers.” This is a significant shift towards more technical language. This is an attempt to manage expectations due to common misconceptions.
Eth2 may sound like a name for an update to Ethereum. It will change from the energy-intensive proof of work (PoW), consensus mechanism, to proof-of stake (PoS). This might be confusing to people who are not familiar with Ethereum. This is dangerously simplified.
Cointelegraph Research has published a free report on scaling that provides an overview of Eth2. This report provides detailed information about the planned technical updates as well as what they mean to Ethereum’s competitors and investors. Access the report on the Cointelegraph Report Terminal for free.
You can download the complete report, including charts and infographics, here.
Eth2’s rollout has taken longer than anticipated due to the complexity and risks involved in migrating a multibillion-dollar blockchain project from one consensus mechanism into another. The Ethereum foundation initially did not give a timeline. Up-and-coming competitors have been trying to steal market share from Ethereum.
These challenges are also detailedly assessed in the report. It contains a comparative analysis on the main players, such as Solana and Polkadot, Algorand, Radix, who are all trying to grab the top spot at DeFi. It was compiled by our industry-leading research team and provides a balanced view of all the major players and cuts through the noise of daily media.
Eth2 – Understanding nuanced realities
It is best to think of the Eth1-Eth2 switch as a series of carefully planned upgrades that will gradually transition the blockchain towards its future. The PoS Beacon, Eth2’s mainchain, was launched in December 2020. Eth1 and the Beacon chains will merge in Q2 or 3 of 2022.
While this may seem to mean that Ethereum will solve all its problems, casual observers are unlikely to notice any significant impact on gas prices or network capacity. Although PoS will reduce Ethereum’s energy consumption, it will not improve its scalability. Data sharding will be introduced in 2023. Although Sharding was originally planned to occur before the merger, it has been postponed under the new timeline. Officially, this delay is due to the availability of layer-2 solutions. Scalability has become a lower priority.
The new terminology of “consensus layers” and “execution layers” is meant to dispel the myth of an instantaneous point when all Ethereum’s problems will disappear. Eth1 is now associated with the consensus layer, while Eth2 is strictly associated with the execution layer. This shifts the focus away from the third layer of data availability that would have been affected by the delayed data sharding upgrade.
It may seem tempting to believe that alternative decentralized finance (DeFi), blockchains, is over with the merger scheduled for later in the year. Investors should not jump to premature conclusions. Eth2 is not a quick fix for everything, so it is important to keep track of the competitive landscape.
This article is intended for information only. It does not constitute investment advice, an investment analysis, or an invitation to purchase or sell financial instruments. The document is not intended to replace individual investment advice or any other advice.