Today, I want to talk about a very interesting topic, especially since it was recently released, on the 1st of December 2020: Ethereum 2.0.
During my quest to understand what the ETH 2.0 is, I found that the Internet is full with posts, articles and videos related to ETH 2.0. Even on Publish0x, I saw some interesting ones, but the purpose of today's post is to describe in my own words what ETH 2.0 is. Everything I've found so far is explained in technical terms and it was very hard for me to understand correctly what it is and how it functions. I believe it's also the case for all crypto-beginners.
I will try to cover this topic in a way, as simple as possible, so that everyone can understand, considering that I am not an expert in crypto either. Those who want complex explanations can search the Internet because there are many tutorials, articles, YouTube videos where many details about ETH 2.0 are explained and are very explicit.
I will address in this post to those who are at the beginning of the road, as I am, who do not understand the phenomenon very well or for those that only have a basic notion and want to understand to some extent what ETH 2.0 means.
I'll start by talking about Ethereum.
ETH is the second most important crypto-currency and keep in mind that currently there are over 10.000 crypto-coins available on the market. The value of a coin revolves now, during this period, around the amount of $1000.
It occupies, as I said, the second position, with a total market value of $116.4 billion and a volume of $80 billion, according to Coinbase.
ETH managed to reach in the last couple of hours, its highest value since January 13, 2018. It has been registered a value of $1.168,99 in the morning of the 4th of January 2021.
What is ETH 2.0?
ETH 2.0 is an update to the blockchain used by Ethereum. ETH 2.0 is also called Serenity. The goal is to improve the speed of transactions and the number of transactions. It has no implications for ETH. ETH 2.0 is just an upgrade.
If there are any experts among my readers, I will post this picture that describes what the upgrade is all about.
What is actually changing?
The main idea behind this upgrade is that the developers wanted to make Ethereum
more scalable, secure and sustainable.
Until the launch of this this blockchain upgrade, transactions were validated and verified by miners. Those miners used mining equipment to validate and verify transactions. Now, the story has changed.
Transactions will be validated by people who own Ethereum. The condition of ETH is that the user must have a minimum stake of 32 ETH in his/her wallet and for the moment, after the upgrade has been online, the ETH amount will be blocked for at least two years.
The upgraded Ethereum network will switch from the proof-of-work to the proof-of-stake consensus algorithm, replacing miners with validators who will bet their coins to verify transactions. Once validators verify honest transactions, they will receive the rewards in the form of passive income — this process is called staking.
During this period, those who deposit 32 ETHs cannot reach their money, but they will receive an annual reward, depending on the number of those who deposit these minimum amounts of 32 ETH minimum necessary to become validators. The higher the number, the lower the yield. In the first phase, it is estimated that those who will submit ETH and will become validators, will receive somewhere around 5% per year. There are voices that say it can be even more. But I think this percentage would be the minimum anyway.
One fact to keep in mind and a detail that myself hardly understood, is that in exchange for the minimum amount of 32 ETH, the user will receive rewards in ETH also. The reward doesn't come in US dollars. It's problematic, because if I deposit 32 ETH today, when the value is $1k per ETH, and at the end of the two year period the value is $500, I will receive the equivalent in ETH, not in US dollars. This means that I will lose money. The only way to make profit is when at the end of the two year period, the value of ETH is bigger than the value ETH has when it has been deposited. That's how profit can be made.
In conclusion, that's the idea of ETH 2.0. It is a big change. Up until now, the validations were done through mining. Now they are done in the network, the confirmation of transactions through holders, people who hold ETH and these coins are used in the network for transactions.
It is very important to be careful if we want to become a node and we want to do this whole process of becoming stake validators with the minimum amount of 32 ETH. We must be careful that our equipment must be permanently in operation. We are not allowed to disconnect it from the Internet. There are variants, secondary companies that offer staking services and then we have the guarantee that we do not risk any penalty.
My successful faucets!
PipeFlare & Hive ZCash - ZEC with tier 4 referral program
FreeCryptos: (DASH), (TRX), (ETH), (Cardano), (BNB), (LINK), (NEO), (LTC) & (BTC)
Free-Litecoin
Stakecube (over 20 single click faucets per day)
Coinbase easy $10
Join DeFi and get $30 of DFI. Join CakeDeFi now!!
