Ethereum 2.0, double bet or quit? Focus on the upgrade that could change everything

Proof of Stake is coming soon: Launched since 2015, the network consensus Ethereum (ETH) is secured by the mechanism of work test. However, as soon as the network was launched, the Ethereum developers expressed their desire to change the consensus mode from proof of work to proof of stake. As we approach this great transition, let’s take a look back at the developments come just like commitment inherent in these changes.

Ethereum and the search for scalability

Network Ethereallike many other blockchains, it faces a important scalability problem. As it is, the network cannot handle the growing mass of transactions taking place on the network. To overcome this problem, the developers have come up with a series of updates, aimed at greatly improving network performance.

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The merger: the transition to proof of stake

Among these updates, we find the long-awaited transition from proof of work to proof of stake. In fact, as we saw in the introduction, this transition has been on the minds of developers since the network launched in 2015.

However, given the complexity of its implementation, this transition was repeatedly postponed over the years. Ultimately, this will take the form of an update called “The fusion”with the goal of linking the beacon chain’s proof-of-stake consensus layer with the Ethereum execution layer, i.e. the existing decentralized application ecosystem.

There is currently no no official date for the deployment of The Merge. However, the developers expect a deployment of this in the second half of the year 2022.

However, let’s keep in mind an important point: The merger will not improve the performance of Ethereum. In fact, the transition to proof of stake will have almost no impact on network scalability. However, this will be the cornerstone for the implementation of other updates that will have an impact on performance.

Sharding: the multiplicity of blockchains

In the blockchain world, there are 2 main methods to improve the performance of a network:

  • the vertical scalingwhich aims to increase the individual capacity of network computers;
  • the horizontal scalewhich aims to increase the capacity of the network by increasing the number of computers that make it up.

then the update fragmentation It is a technique of horizontal scale. In practice, this aims pull apart the network into many sub-blockchains called shards, as explained by the relationship from CoinShares:

“Fragmentation makes it possible to increase the overall performance of the protocol, without increasing the computational demand of the individual computers working on it. In other words, Ethereum will be able to process much more information, while hoping to be able to rely on relatively casual users, by providing distributed processing power across ordinary consumer computers. »

The advantages and disadvantages of these updates

Obviously, like all solutions, proof of stake and sharding involve certain commitment. Let’s take a closer look at these tradeoffs, based on analysis by CoinShares.

Fragmentation compensations

One of the main advantages and disadvantages of fragmentation is in the field of decentralization. In fact, the horizontal scalability technique has a propensity to reduce network decentralization.

In fact, one of the main characteristics of a decentralized blockchain lies in the possibility that a network participant check again all the transactions that have taken place on the network. Thus, the participant can take advantage of the network without you have to trust him other attendees.

As we have seen, sharding aims to divide the blockchain into a multitude of other blockchains. Therefore, the power and bandwidth required to verify all the data increases dramatically with the number of shards.

“The result is the reintroduction of trust, as all users who are now unable to verify all shards (or a single huge blockchain) must trust other users to tell them the truth about what happened in the shards. blockchain that they can no longer afford to self-verify). »

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Proof-of-stake commitments

The undermining of trust

The introduction of proof of stake implies the i need to trust again other network participants.

In the case of proof of work, miners spend electricity to secure the network. In a nutshell, this expense assures other participants that the minor will not have no economic incentive act maliciously, because it would lose the cost of electricity.

In the case of proof of stake, validators deposit 32 ETH in stake. However, betting is depends on an internal value to the Ethereum network, unlike electricity, which is an external value to the blockchains.

“It is a problem if a new or returning user is faced with a choice between multiple conflicting blockchains presented to them by a malicious actor. Since it costs nothing to create a PoS blockchain, rogue participants can create and externally submit valid fake stories en masse. »

Centralization

Proof-of-stake networks also do a commitment about resistance to censorship.

For a proof-of-work based blockchain, a malicious actor must take advantage of 51% power from the grid to be able to censor transactions. In the case of PoW, miners must deploy machinery and electricity to carry out their attack.

“In a PoW system, miners need to consume a resource external to the system and they also need external capital (hardware). This can be achieved without the majority miner knowing, which means there is a mechanism by which a censor can lose their place as majority miner. »

In the proof-of-stake case, this return to equilibrium by the input of an actor fighting the majority validator does not exist. Thus, when a validator manages to maintain a majority position by having more ETH at stake than the others, it is protocol impossible to evict. In fact, as time goes by, their share only increases and establishes their majority position.

The only one solution to this type of attack lies in the social consensus. Therefore, the community must agree to implement a hard fork intended to thwart the attacker.

“Which is just another way of saying centralized management by a select committee, which by definition is the opposite of decentralized. »

CoinShares Report

conclusion

As you may have understood, the blockchain ecosystem and the blockchain trilemma is, in the end, just a compromise story.

Blockchain trilemma.
Blockchain trilemma.

On one side, Ethereal goes wide gain in performance and solve part of the trilemma by improve scalability. On the other hand, this improvement will come at the expense of security and decentralization.

Obviously, risk propensity differs between individuals and between networks. This means that proof-of-stake limits can be exacerbated or minimized depending on various parameters inherent to each blockchain. For example, to perform a censorship attack on Ethereum, a validator or group of validators must own more than 34% of the network.

Currently, the chain of beacons has 380,000 validatorsFor more than 12 million ETH staked. These malicious users should have 4 million ETH or 8.5 billion dollars.s. However, once the attack is carried out, the price of ETH is very likely to crash. This would result in a deadweight loss for the attackers.

As always, for an attack to occur, the result must be more profitable than the means deployed to carry it out.

In addition, the developers of the Ethereum network continue to work at a reduction of these commitments through various mechanisms.

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