Ethereum 2.0 upgrade next in line Ethereum 2.0 upgrade next in line Ethereum 2.0 upgrade next in line

Ethereum 2.0 upgrade next in line

Anders Nysteen

Senior Quantitative Analyst, Saxo Bank

Summary:  The initial phase of the Ethereum 2.0 release is expected to take place soon and is planned to boost both scalability and security and make it more sustainable. The current framework for validating transactions through mining will be gradually replaced by a staking framework over the coming years.


A major upgrade of the Ethereum network is close to launching its initial phase. According to ethereum.org, the vision is to make Ethereum:

  • More scalable - Must be able to support 1000s of transactions per second, instead of the current level of around 15 transactions per second.
  • More secure - An increased adoption of Ethereum requires an even better security protocol
  • More sustainable - The current technology relies on crypto mining which requires too much energy.

Up until now, transactions on the Ethereum network have been processed by a proof-of-work concept, where transactions are verified by mining – well-known from bitcoin – which demands huge amounts of computational power. In Ethereum 2.0 this will be replaced by a proof-of-stake framework driven by validators. Each validator will be staking 32 ETH to activate the validation software. By running the software they will receive rewards for validating transactions and creating new blocks. But they will lose their staked ETH if they try to cheat and manipulate the system, if they go offline or fail to validate in some other way. It will not be possible to withdraw the stakes before the entire network has fully progressed to proof-of-stake – see timeline below. This new validation scheme may be run on a simple laptop and thus minimizes the power consumption to run the network, compared to the current requirements.

Timeline – with stake-dependent launch date

The launch of the initial phase depends on 16384 stakes of 32 ETF which must be collected at least seven days before the launch date which currently is set for December 1, 2020. If these stakes have not been received by November 24, the launch will be postponed to seven days after the threshold have been reached. As of today, only around 60 % of the required stakes have been collected, so an overrun of the planned schedule seems likely.

The timeline for the three phases is:

  • Phase 0 (expected December) – The Beacon Chain: Launch of the Beacon Chain where early stages of Ethereum 2.0 with the proof-by-stake will be introduced, side-by-side with current, main proof-of-work network which will remain unaffected in this phase.

  • Phase 1 (expected 2021) – Shard chains: By introducing shard chains, validators will only need to run data on a part of the entire network – on their “shard” – and will speed up the process and minize the hardware requirements.

  • Phase 2 (expected 2022) – The docking: The final implementation of Ethereum 2.0 where it is merged with the main Ethereum network. This will make the end of the proof-of-work for Ethereum.

Impacts of Ethereum 2.0

The Ethereum community is hoping that the lowered requirements for participating by staking instead of by mining will increase the number of validators on the network, which eventually will make it more difficult to attack the blockchain. The major improvements of the network may attract more traders to ETH, but on the other hand the current lack of support for staking into the launch can turn out as a defeat for the Ethereum community.

Note: Current holders of ETH do not need to take any actions to account for the upcoming upgrade

Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.