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What’s Ethereum 2.0? A Complete Guide

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Ethereum (ETH), a crypto platform, was launched in 2015 by 21-year-old Vitalik Buterin, along with Charles Hoskinson, Anthony Di lorio, Mihai Alisie, and Joseph Lubin. Presently, Ethereum is the second-largest cryptocurrency by value and market capitalization behind Bitcoin. It has since become a rapidly growing community and is on its way to its first major upgrade, Ethereum 2.0.

Before we go any further, let’s start from the beginning to better understand what Ethereum is and how it evolved into the dominant ecosystem we know today.

What’s Ethereum?

Ethereum is a decentralized blockchain with an open-source protocol. It houses its own cryptocurrency, ether. However, the Ethereum network goes beyond cryptocurrency; it describes itself as "programmable money."

Ethereum's platform uses smart contracts, which is a contract that autonomously activates when it meets a set of predetermined conditions. This enables users to create applications on its network, including a wide range of games, social networks, and financial services.

Because of its decentralized nature, Ethereum's blockchain is not controlled or regulated by a central authority like a bank or a government. Instead, it offers its users complete transparency, proof of ownership, censorship resistance, and guarantees almost 24/7 uptime year-round.

So, why change to Ethereum 2.0?

Ethereum 2.0, or ETH2 or ETH 2.0, won't be Ethereum's first system change. In fact, Ethereum has already gone through five different editions. However, Ethereum 2.0 is significant because it’ll be Ethereum's largest change yet: A faster crypto platform that's quicker, more efficient, more eco-friendly, and more scalable.

In terms of processing speed, Ethereum can currently process around 30 transactions per second. Ethereum 2.0 will bump this up to a whopping 100,000 transactions per second, which is a massive jump. But how’s it possible? Ethereum 2.0 aims to make these changes feasible through two upgrades: Proof-of-stake (PoS) and sharding.

Let's dive into both to get a more precise understanding of what they are and the functions they serve.

Proof-of-work vs. proof-of-stake

One of Ethereum 2.0's key breakthroughs is its transition from a proof-of-work (PoW) consensus mechanism to a PoS one. Let’s understand in detail.

What is a consensus mechanism?

A consensus mechanism is a foolproof algorithm used in blockchain technology. This protocol ensures synchronization across a network and verifies the legitimacy of cryptocurrency transactions. A consensus mechanism's primary task is to ensure all transactions are valid among all its distributed nodes.

For example, Bitcoin's consensus mechanism is called PoW and involves miners who use complex computational power to mine and validate new blocks on Bitcoin's blockchain. A miner's effort is known as PoW, ensuring that the transaction is legitimate.

What is proof-of-work?

PoW mandates that all participants on a blockchain verify transactions using nodes, which are their own computer systems. Exogenous miners compete to be the one who can add new transactions to the blockchain for a reward. 

What is proof-of-stake?

Cryptocurrency holders use PoS to verify transactions depending on how many ETH a validator stakes. Ethereum’s blockchain uses these staked ETH to secure transactions. Ethereum's PoS protocol requires validators to hold at least 32 ETH to ensure the security of operations.

This method reduces the demand for complex and costly hardware because users don't require expensive equipment to validate transactions. PoS also ensures lower energy usage, allowing more individuals to become Ethereum validators.

Why does this change matter?

PoW expends large amounts of energy to mine new blocks and validate crypto transactions. Plenty of these transactions have seen a significant amount of computational power squandered due to processing failure or inability to solve complex problems required to mine blocks.

PoS will decrease the time and expenses involved in such activities. As a result, Ethereum transaction fees will also reduce, making ether and other crypto assets more accessible and affordable to the average user. Ethereum 2.0 will reward those who own and stake ETH rather than incentivizing miners.

All this leads to higher accessibility. The more affordable ETH is, the more participants there are. An increase in users sees more verified transactions, which leads to an effective growth rate for Ethereum 2.0 to scale.


Sharding involves splitting a single blockchain into multiple consensus groups called shards. Instead of overloading one blockchain, sharding divides the computational power required to process and validate transactions, making the entire network more sustainable and efficient.

As a result, the work is spread out, and no single node has to carry the burden of using its computing power to maintain the blockchain. Each node keeps records on its shard. Validators, the individuals behind each node, constantly switch between shards to reduce the chance of tampering.

At the center of Ethereum 2.0 exists The Beacon Chain: A mechanism that organizes and holds a database of validators and coordinates all shards. The Beacon Chain creates new shards, verifies them, and rewards validators with ETH to keep the shards secure.

Ethereum 2.0 roadmap

Since its inception in 2015, Ethereum has grown in popularity as the largest multi-use blockchain outside pure cryptocurrencies. Its implementation is in full flow, releasing in three phases:

  1. Phase 0: Phase 0 saw the launch of the Beacon Chain at the core of Ethereum 2.0's network. This phase was released in December 2020 and cemented the Beacon Chain as a coordination mechanism that facilitates sharding.
  2. Phase 1: Phase 1 is scheduled to launch around the third quarter of 2022. This phase will see the Beacon Chain merging with Ethereum 1.0 (ETH1), when ETH1 becomes a shard of ETH2 through a process called “docking.” Phase 1 will also launch 64 shards and see them integrated into the Ethereum mainnet. The docking process is a significant aspect of the merge and can be seen as Phase 1.5.
  3. Phase 2: All 64 shards will reach full functionality with smart contract compatibility in Phase 2. Additionally, Ethereum 2.0 will enable decentralized application (dApp) integration, transactions, and cross-shard interoperability.


Ethereum 2.0 has seen plenty of debate rage before its touted launch, which has given rise to several misconceptions, such as:

Is Ethereum 2.0 a new cryptocurrency?

Ethereum is, in fact, not a cryptocurrency. It’s the blockchain that houses ether, which is Ethereum's cryptocurrency.

Ethereum 2.0 will not change any aspect of ether but will introduce several changes to Ethereum's blockchain functionality. All ETH transactions to date will see no change after Ethereum 2.0 launches.

Gas fees will go down automatically when the changes go live

Ethereum’s current limitations lie in its processing power. Remember how ETH 2.0 will boost the processing speed from 30 transactions per second to 100,000? Despite this massive change, gas fees, which users pay to complete transactions, won’t see a significant change solely based on this change. It is likely post-merge that more activity will migrate to scaling solutions, which should have lower gas fees.

You’ll have to update your apps to be compatible with ETH 2.0

Average Ethereum users have nothing to worry about here. dApps, DeFi (decentralized finance), NFTs (non-fungible tokens), and other applications will see no change and will continue to function normally.

This’ll fix all issues with scalability

Vitalik notes that scaling solutions such as L2s will still be required after this upgrade is finally complete. Ethereum won’t be a finished product, and there’s always room for iteration. 


Ethereum 2.0 is set to launch in 2023, although its initial launch was planned for 2019. Ethereum's lead developer Tim Beiko cited bugs and code complexities as reasons for the prolonged delay. It’s also likely that the decentralized method of development has contributed to the delays. However, these delays may harm Ethereum's standing in the crypto market, leading to rumors and speculation about its successor's launch. Nonetheless, as the world's most popular general-purpose blockchain, Ethereum 2.0's launch is eagerly anticipated in the crypto and tech communities.

What’s the future of crypto?

The cryptocurrency space is thriving. Ethereum 2.0's delayed release might be worth considering other cryptocurrencies. Worldcoin is a new company that aims to give every person on the planet a free share of its cryptocurrency while providing its users with complete privacy.

At Worldcoin, we believe in the power of crypto, but we understand our users' need for privacy and anonymity. To find out more, subscribe to our blog and join the ever-expanding crypto community with Worldcoin!