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Ethereum 2.0 Journey in 3½ Phases Is About to Start With Phase 0

Sead Fadilpašić
Last updated: | 9 min read

The long-awaited, much-discussed second iteration of the Ethereum (ETH) network is slated to take an important step on December 1. It will not actually fully roll-out at once – instead, the very first day of December will see the first of its phases, laying the basis on which the rest will be built. Therefore, we’ll look into what lies ahead until the planned Ethereum 2.0 (ETH 2.0) full arrival.

Source: Adobe/Nick Fox

Ethereum 2.0, also known as Serenity, is the second version of the original network, or as defines it, “a set of interconnected upgrades that will make Ethereum more scalable, more secure, and more sustainable.” And this is what the many developers behind it want to achieve: improved scalability, speed, resilience, as well as the efficiency of the network – all major points of discussions and complaints, and one would say the network’s chronic ailments.

They plan to accomplish this through two primary improvements introduced in ETH 2.0 that don’t exist in ETH 1.0, as ETH-focused major blockchain company ConsenSys stated and Ethereum co-founder Vitalik Buterin noted:

  • 1. switching from the current proof-of-work (PoW) consensus algorithm to proof-of-stake (PoS);
  • 2. shard chains.

Ethereum 2.0 will not eliminate any of the data history, transaction records, or asset ownership of the first chain. It will run parallel with ETH 1.0 until the latter is gradually phased out. Therefore, through each phase, Ethereum is supposed to become a transparent, open network that allows a significantly higher number of transactions, and each with lower transaction fees, which have recently been rising.

Nobody can say with any certainty how long will it take to go from Phase 0 expected on December 1 to Phase 2, though there is a tentative timeline which we’ll be discussing below. In either case, at the moment we’re talking years, rather than months, until the full launch, and each step will depend on the success of the previous one.

This was well-seen with a number of testnets the Ethereum camp had launched in preparation for the first phase of ETH 2.0, in order to mimic and test mainnet conditions, starting with the developer testnets, and the public multi-client testnet Altona in June, moving to the public testnet Medalla in August, which had experienced some low participation issues early on, and then doing two so-called ‘dress rehearsal‘ testnets, as the first one had failed.

The current plan is for the ETH 1.0 chain to effectively become the first shard on ETH 2.0 with the launch of Phase 1.

As for your coins, the team says there’s nothing for you to do – they are fully usable on ETH 1.0, and when this chain eventually becomes part of ETH 2.0, your ETH will continue to function as they do now automatically.

Importantly for ETH 2.0, another major event in the network’s history was developing this year – the deposit contract episode. To put it shortly, without the deposit contract, there would be no launch of the first step in the ETH 2.0 journey. So let’s pick up ‘the journey in the 3½ phases’ from here.

Phase 0

It has been much-guessed when Phase 0 might finally arrive, though most of the forecasts pointed to the end of this year. One of the final steps before the launch of this phase was the deposit contract, as it enables ETH transactions between the original Ethereum and its second iteration. A specific number of staked ETH was needed to trigger the genesis time, and though it was an uphill battle, whales and smaller stakers sent all the needed ether to the contract in the last few hours. Therefore, per Ethereum researcher Justin Drake’s tweet, the genesis block is set for December 1, 12:00:23 UTC.

Importantly, Phase 0 doesn’t have accounts, nor can it handle smart contracts, said Making transactions on ETH 2.0 won’t be possible yet. However, it introduces staking. It will launch the Beacon Chain, which establishes and maintains the proof-of-stake consensus mechanism by storing and managing the list/registry of validators – meaning, users are staking ETH, becoming validators, in order to activate validator software, and as such, they process transactions and create new blocks in the chain.

The Beacon Chain’s role is likely to change over time. Also, in the beginning, the Beacon Chain will exist separately to the Ethereum mainnet used today, but the plan is to eventually “dock” or “merge” mainnet into the proof-of-stake system that’s controlled and coordinated by the Beacon Chain. Per, this is estimated to happen in 2022.

As reported previously, PoS will enable users to earn rewards through staking ETH on the network, acting as an active or passive validator, and to do so, they will have to lock up their ETH in the deposit contract. For those who didn’t send their ETH to the deposit contract by the Phase 0 launch deadline, their validators won’t be included in the genesis event on December 1, said Anthony Sassano, SetProtocol product marketing manager and author of the Ethereum-focused newsletter The Daily Gwei, adding that “not being part of the genesis event isn’t a big deal – it’s mainly for bragging rights.” That said, users can still send ETH to the deposit contract and spin up validators at any time.

Furthermore, ETH teams have begun releasing their mainnet-ready clients, Sassano added in a subsequent post. ETH 2.0 stakers need to decide what client they want to run among Prysm from PryLabs, Lighthouse from Sigma Prime, Nimbus from Status, and Teku from ConsenSys. “One of the worst things that could happen on December 1st is that people forget to or have trouble with setting up their validators and the chain fails to start because of this (and you may begin to lose ETH due to inactivity),” he said, urging people to go for diversity and not overwhelm the most popular Prysm, which had caused issues before.

Phase 1

The second phase of Ethereum 2.0 is estimated to launch in 2021, and its primary improvement is the integration of shard chains to improve scalability. Phase 1 builds upon Phase 0 by allowing data to be put into shards. “The implementation complexity of this component is much smaller than the others as phase 0 lays most of the groundwork for the shards,” said researcher at the Ethereum Foundation Carl Beekhuizen. The primary improvement of Phase 1 is the integration of shard chains to improve scalability.

Sharding divides the blockchain’s nodes into smaller groups, ‘shards,’ and instead of validating the same transactions at the same time, different shards validate different sets of transactions, thus increasing the number of transactions processed per second.

Per ConsenSys, “at its most conservative estimate it will enable 64 times more throughput” than ETH 1.0, but it’s designed to handle “several hundred times more data” than ETH 1.0.

As Buterin discussed before, sharding should be combined with rollups – a scaling technique that keeps transaction data on-chain, in a compressed form, but the computation is pushed off-chain. He said back in July that “rollups will be the dominant scaling paradigm for at least a couple of years.” On a public chain, a maximum of 15 transactions per second (TPS) can be done, Buterin had said, but he added that with rollups and Ethereum 1.0 as the data layer, the TPS would be reaching 2,000-3,000, and then with the full introduction of Phase 1 and sharding, the number could theoretically go as high as 100,000 TPS.

“Moreover, the sharding + rollups mechanism will transform Ethereum into a viable backbone for blockchain applications accessible to everyone,” Pol Lanski, from the tech team at decentralized zk-rollup Hermez, said in an emailed comment, adding that “Layer 2 solutions are currently the closest thing to Ethereum2 that we have. They are the solution to scalability NOW,” and scalability will be even higher with ETH 2.0, “orders of magnitude higher.” Layer 1 is the base protocol (the Ethereum blockchain), while Layer 2 is any protocol built on top of Ethereum.

Phase 1.5

To maintain the suspense a bit longer before the final stage launch, we’ll see an interim update between 1 and 2 – or the merger phase during the Phase 1 upgrade – aptly named 1.5. As Ethereum protocol development is currently split into two distinct paths, ETH 1.0 and ETH 2.0, “these two are due to eventually meet at some point in the future,” according to Sassano. “This meeting will happen in the so-called ‘phase 1.5’,” he said.

After Phase 1.5, the Ethereum 1.0 chain will run as a shard of the Ethereum 2.0 PoS blockchain, said ConsenSys, and “this will be the moment when the full functionality of the Ethereum 1.0 chain – including the use of ETH – will become functional on Ethereum 2.0 without risking a break in data consistency.”

This is also where Buterin’s idea of the sharding+rollups scaling technique comes into play. He emphasized that ETH 2.0 will bring “rollups on top of sharding,” not “rollups instead of sharding.” By using shard chains as data availability layers and rollups as the execution environments instead of the shards, argued Buterin, a PoS network could already be reached in Phase 1.5 instead of waiting until Phase 2, he said, providing the so-called “rollup-centric roadmap.”

“The main reasoning Vitalik gives for focusing our energy on this rollout plan instead of on getting to [P]hase 2 is he believes that by the time [P]hase 2 rolls around, we’ll already have a bustling layer 2 ecosystem which optimistic rollups will be a big part of,” wrote Sassano. Buterin stated in this explanation that it “seems very plausible to me that when phase 2 finally comes, essentially no one will care about it. This implies a “phase 1.5 and done” approach to [ETH 2.0], where the base layer retrenches and focuses on doing a few things well – namely, consensus and data availability.”

Other developers have continued making proposals based on Buterin’s initial rollup-centric idea.

Phase 2

This is the final stop to the full ETH 2.0, but it might be quite a while away. Per Consensys, it will likely be launched in 2021 or 2022. This is the phase, said ConsenSys, the functionality of Ethereum 2.0 comes together. It is currently less clearly defined, but it will involve adding ether accounts, enabling transfers and withdrawals, implementing cross-shard transfers and contract calls, building execution environments so that scalable applications can be built on top of ETH 2.0, bringing the ETH 1.0 chain into ETH 2.0 so to turn off PoW.

It will also bring the switch from ETH 1.0’s virtual machine to Web Assembly (eWASM), defined by the World Wide Web Consortium (W3C) as an open-source standard.

Buterin previously argued that base-layer scalability for applications is not coming until Phase 2, “which is still years away,” and said recently that the final switch from the current PoW, which involves mining and is also used by Bitcoin (BTC), to PoS is not expected for at least another year.

This will not be the end of the road though, as many further improvements are planned for research and development after Phase 2 is complete, with Buterin offering a possible timeline for the next 5-10 years.

While CEO and Co-Founder of cross-chain data oracle Band Protocol, Soravis Srinawakoon, finds that ETH 2.0 will bring “a real increase in adoption rates,” CoreLedger CEO Johannes Schweifer stated that “Proof of Stake will bring us closer to a solution” to a major challenge with the status-quo – the limitation of transaction throughput and the transaction cost. However, said Schweifer in an emailed comment, this new technology “will need time to mature and prove itself.”

Also, the event on December 1 is going to be live-streamed here:

At the time of writing (17:18 UTC), ETH trades at USD 604 and is up by almost 9% today, outperforming BTC (+6%) that started its series of hitting all-time highs.
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