Ethereum 2.0 – a Beginners Guide

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  • Ethereum 2.0 promises to revolutionize the Ethereum network
  • The new version will be faster, more scalable, and less energy intensive
  • What are the key differences between Ethereum and Ethereum 2.0?

Ethereum 2.0 will launch Phase 0 on December 1, the first of four planned phases that will gradually see the five year old network shedding its skin and revealing a glittering new layer underneath. The network will be faster, leaner, and less energy intensive among other improvements, but what are the key benefits that Ethereum 2.0 will have over its predecessor? Our Ethereum 2.0 beginners guide outlines the key differences between the old network and the upgrade.

Proof of Work to Proof of Stake

The biggest change with Ethereum 2.0 will be the move from the existing Proof of Work (PoW) consensus mechanism to Proof of Stake (PoS). PoW, which is still used by Litecoin, Bitcoin, and Monero, utilizes physical mining machines, typically ASIC miners, to achieve consensus on the blockchain.

PoS allows anyone who holds over a certain amount of tokens (in Ethereum 2.0’s case 32 ETH) to act as a node and help the network achieve consensus. Instead of running energy-intensive mining machines, Ethereum 2.0 only requires that these nodes stake their tokens in a wallet which is continually connected to the Ethereum network.

This wallet can be run from a standard laptop and potentially even a low powered computer like a Raspberry Pi, with the only condition being that the tokens remain staked and that the machine remains operational as much as possible, ideally 24/7.

Ethereum 2.0 stakers will be rewarded with Ethereum as payment for their work, with 0.14 ETH being the current monthly reward. PoS opens the possibility of being a ‘miner’ to anyone who holds 32 ETH, massively dropping the barrier to entry.

Reduced Coin Supply

Ethereum 2.0 will see a huge reduction in the token issuance, increasing scarcity of the token. Currently, 4.7 million ETH are introduced into the ecosystem every year by miners, but the move to PoS will drastically cut this.

The actual figures are disputed, but we do have a range to work with. Ethereum creator Vitalik Buterin said in May that 2 million coins per year represents the “theoretical maximum issuance…if literally everyone participates”, while others have calculated that a figure of 100,000 is more likely given that the uptake will initially be slow.

Regardless, a massive supply drop is imminent, potentially the equivalent of two or three halvings taking place at once, and it will be interesting to see what this supply reduction will do to the price over time.


Perhaps the chief criticism of the Ethereum network as it stands is that it simply cannot scale. The network becomes clogged too easily leading to expensive transactions, as those who tried to transact during the CryptoKitties and DeFi crazes can attest. This is because the PoW consensus mechanism only allows one block at a time to be processed, leading to a backlog of transactions at busy times.

Ethereum 2.0 has solved this problem by implementing sharding, a process that partitions the network into 64 separate chains called ‘shard chains’, which run parallel to one another and interoperate seamlessly. This allows Ethereum 2.0 transactions to process multiple transactions simultaneously, up to 64 blocks worth.

Ethereum 2.0 Improvements Critical For Continued Engagement

These three improvements will really help bring Ethereum into the modern age and will ensure that the thousands of dApps built on it don’t fall behind or look elsewhere. There are more dApps built on Ethereum than ever before, and with mainstream businesses looking to move into the blockchain arena, the introduction of Ethereum 2.0 couldn’t have come at a better time.

Ethereum already has a pedigree as the first blockchain-based smart contract platform, and it was clear that this reputation was one of the factors keeping it afloat. While there are still faster blockchains out there, Ethereum 2.0 leverages the name and reputation of Ethereum with rapidly improved speed and scaling, which could be just what it needs to keep the competition at arm’s lengths.