How can Ethereum’s rebranding from Eth2 help manage high expectations? And what is the Migration like? Cointelegraph Research releases its report.
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.
The free scaling report published by Cointelegraph Research provides a sound overview of Eth2. It gives detailed information on the planned technical updates and what they mean for Ethereum’s developers, competitors, and investors. The report is free to access on the Cointelegraph Report Terminal.
Download the full report here, complete with charts and infographics.
The complexity and risk of migrating a multi-billion dollar blockchain project from one consensus mechanism to another have meant that the roll-out of Eth2 has been slower than expected and the Ethereum foundation initially gave no definite timeline. In the meantime, up-and-coming competitors with scalable projects have been vying to take away market share from Ethereum.
The report also assesses these challenges in detail. On 74 pages, it offers a comparative analysis of the major players such as Solana, Polkadot, Algorand and Radix which are trying to snatch the top spot in DeFi. Curated by our industry-leading team of researchers, it provides a balanced view of the big picture and manages to cut through the noise of social media and the daily press.
Eth2 — Understanding a nuanced reality
The switch from Eth1 to Eth2 is better thought of as a carefully engineered series of upgrades that will slowly transition the blockchain to its envisioned future. Eth2’s main chain, the PoS Beacon chain, was already launched in December 2020. The merging of Eth1 with the Beacon chain is expected in Q2 or Q3 of 2022.
Although to a casual observer this might mean that all of Ethereum’s problems will be solved, the update later this year is not likely to have a big impact on gas fees or the capacity of the network. While PoS will significantly reduce the energy consumption of Ethereum, improved scalability will only come once data sharding is introduced in 2023. Sharding was initially going to happen before the merge but has been delayed under the new timeline. The official rationale for this is that scalability is now a lesser priority because layer-2 solutions have become available.
The new terminology of “consensus layers” and “execution layers” is meant to dispel the mythical notion that Ethereum’s problems will disappear at once. 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.