In 2020, the first phase of the ethereum 2.0 network will be launched. Dubbed Phase 0, this initial evolution of Network 2.0 will launch the beacon chain and enable the proof-of-stake consensus mechanism.
The entire blockchain ecosystem, and ethereum in particular, has evolved considerably in its early years, with a lively history of hard forks, airdrops, icos, wrapped tokens, and token migrations. Reasonably, even the brief history of this technology can be confusing to ether holders who simply want to know what, if anything, they should do to make sure their crypto is safe and where it should be.
Looking ahead to the release of ethereum 2.0, therefore, the natural questions for most eth holders are: what happens to the ether I’ve bought over the years on the current ethereum blockchain? ? Do I need to worry about a hard fork or will I have to manage a token migration? does it matter if my ether is on an exchange like coinbase or in a hardware wallet like ledger?
for most eth holders i.e. hodlers, dapp users, traders – the answers are: no, you don’t need to do anything. no, there will not be a hard fork or migration. no, it doesn’t matter if your ether is on an exchange or not.
for eth holders who are interested in staking, there is an opportunity to be more active with your eth in this early stage of the ethereum 2.0 release.
eth on ethereum 2.0
ethereum 2.0 will be released in phases: phase 0, phase 1 (including phase 1.5), phase 2 and beyond. phase 0 will launch in 2020 and will start the proof of stake mechanism. it is during phase 0 that eth holders who are interested in staking will be able to do so (more details below). however, for eth holders who are not interested in participating, the upcoming release of ethereum 2.0 will not significantly affect their interactions with dapps, exchanges, or blockchain services.
eth holders should only start paying attention in phase 1.5 (which is part of phase 1), which is likely to come at least a year after phase 0. during phase 1, the blockchain ethereum will be broken up into 64 shard chains running side by side. This will significantly increase the scalability and performance of the future Ethereum mainnet (see our Ethereum 2.0 FAQ or What is Proof of Stake? blog posts for more information on sharding).
Phase 1.5 is part of Phase 1, but is given a specific name because it marks the moment when Ethereum 1.0 merges with Ethereum 2.0. specifically, the ethereum 1.0 chain will become one of the 64 shards that make up ethereum 2.0. this means that all data history will be preserved.
for eth holders, this means that no particular action is needed to “transfer” eth from chain 1.0 to chain 2.0. ethereum 1.0 will simply become part of the 2.0 chain (“simply”, referring to the end-user effort, not the extraordinary protocol development work that goes into this transition), meaning eth holders can continue using (or saving) your eth just like before, but in a chain that is more secure and scalable than you were used to.
eth holders and bets on ethereum 2.0
As stated above, eth holders who are only interested in holding, trading, or using their eth in dapps do not have to actively do anything to prepare for ethereum 2.0. however, for eth holders who are interested in staking on the new ethereum 2.0 network, there is an opportunity to get involved starting in phase 0 instead of waiting for phase 1.5.
Staking is the process by which validators allocate eth to the Ethereum 2.0 blockchain to propose and attest to the existence of new blocks. To become a full validator on ethereum 2.0, eth holders must stake 32 eth by depositing the funds in the official escrow contract developed by the ethereum foundation.
Security holders who wish to bet do not need to do so during phase 0: they can join the network as validators whenever they wish. However, unlike other eth holders who have to wait until phase 1.5 to see their eth on the ethereum 2.0 chain, validators can commit their funds to the blockchain as of genesis. the incentive is the potential for higher block rewards.
There are many opportunities for people with eth to start staking on the ethereum 2.0 network and earn rewards. To become a full validator, they must stake 32 eth in the escrow contract, generate escrow keys, and then run their own client. Clients like Pegasys Teku offer this opportunity for companies. If they don’t want to run their own client, they can offload the technical requirement by depositing 32 eth to a staking service like codefi active, which will then be managed by the validation node. Lastly, if eth holders don’t have 32 eth, they can join a staking pool and combine their funds with other people to reach 32 eth.
thanks to mally anderson, ben edgington and james beck.