The launch of Ethereum 2.0 is gradually turning into a mythical event as the development team keeps dragging on with the long-awaited release. Almost halfway into the year, the development team is stating that the launch can be expected by June 2020.
The arrival of Ethereum staking is the biggest and most important event of 2020 after the Bitcoin halving, and most market participants have great expectations. The hype is related to the fact that Ethereum will be shifting from the mining consensus to the Proof-of-Stake algorithm, thus making mining gear redundant. Under the new approach, ETH holders will be able to deposit their coins and become validators for receiving rewards.
But the highly-anticipated Ethereum Phase 0 Serenity upgrade still has no tentative launch date as the testnet is operational and inching to the critical 2-month benchmark.
What will it solve?
The main advantages of the transition from PoW to PoS for Ethereum are greater decentralization and a serious boost in energy efficiency.
If decentralization is to be considered, then users of Ethereum will receive the benefit of staking their assets and doing away with expensive mining gear, thus simply holding their coins for getting rewards. Such an increase in accessibility is certain to open new horizons for the application of the coin and reduce energy consumption.
In addition to becoming more energy-efficient and user-friendly, the Ethereum network will also become more competitive with the Bitcoin blockchain. By doing away with mining, ETH will become more accessible and have a more streamlined architecture for better onboarding, thus gaining ground on the market.
The security layers to be implemented as part of the Ethereum 2.0 upgrade and the staking mechanism will also be making the network more secure and resilient to attacks. Any attack will be considerably riskier, as it will require an immense amount of ETH to manipulate the network. Just one challenge of the attacker’s block by any network participant would put the entire stake of the attacker at risk of being slashed and given to the challenging party.
No less important is the fact that a transition from mining to staking will make it clear that blockchain networks are becoming more mature as economic instruments. The multiple optimizations coming with Ethereum 2.0 will also be acting as incentives for new applications to make the jump and build their services on the new platform.
Too little too late
The Ethereum team has been working on its vaunted upgrade for so long that it seems to have missed the fact that there are other projects racing to implement staking. Unsurprisingly, one of the competitors has already managed to launch an operational network that outstrips existing options.
Harmony, a Silicon Valley startup, has announced that it has launched a staking module on its platform, thus becoming the first blockchain combining PoS and sharding technologies. Over 300 nodes managed by users around the world have already been set up and the network is proving to be a successful solution to the blockchain scalability problem. Harmony states that validators will be able to earn anywhere from 45% to 15% annually during the first year.
On the technical side, Harmony offers one of the highest transaction speeds among base protocol blockchains – just 8 seconds per transaction with plans to go down to 3 seconds. In addition, the transaction fees are minimal, hovering around $0.000001, placing the coin high above its closest competitors. The Harmony blockchain achieved such impressive results after solving the critical problems of low bandwidth, latency, and scalability by using sharding technology. The sharding concept involves a long blockchain containing segments located horizontally relative to the database, thus storing the data on separate servers. Such load distribution makes the storage process more efficient. To make the network even more efficient, it is also divided into 4 segments for faster operation.
Harmony plans to increase its number of nodes to 1000 by the end of the year. In addition, the use of the Proof-of-Stake algorithm instead of the delegated Proof-of-Stake means that anyone holding native ONE Tokens can become a validator and begin to receive passive income.
Blockchain arms race
Harmony is not alone in its race to the staking finish line. There are other projects vying to become the first to claim the crown of being the first to overtake Ethereum. Among them are Dash, Cosmos and Qtum among others.
Dash is claiming that it seeks to improve on Bitcoin and operates through a two-tier incentive called the Masternode network. The latter operates on the PoS algorithm and relies on a system of master nodes for validation. The starting stake is 1,000 DASH acting as collateral. Such an approach improves scalability and requires all nodes to validate transactions for them to be passed.
Cosmos is a network aiming to become an interoperable blockchain for easy integration of DApps. The underlying PoS algorithm operates on the ATOM token and holders can delegate their stakes to any of the 100 validators. The slashing mechanism of Cosmos incentivizes honesty, as it destroys locked up stakes in case of fraudulent behavior. The yields for Cosmos range anywhere from 7% to 20% annually.
Qtum is also a PoS blockchain built on version 3 upgrade for UTXO-based blockchains. If compared to Ethereum, Qtum has a number of security advantages over the Casper model of the giant. The Decentralized Governance Protocol of Qtum allows specific blockchain settings to be modified by making use of smart contracts. For instance, the block size of Qtum can be increased without the need for a hard fork.
At the dawn of a new era
As the Ethereum 2.0 update encroaches, the competitors are gearing up for putting up their products against the lingering titan. But the big question is whether all of these solutions will be able to fully replace Ethereum 2.0 or whether they will co-exist. Only time and the full implementation of Ethereum 2.0 will tell.