Everything you need to know about Ethereum 2.0 before mainnet launch

By November 12, 2020Ethereum
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  • Ethereum 2.0 rollout is scheduled for December 1.
  • There are several things investors should keep in mind to navigate through the transition period.

The launch of the second version of the Ethereum protocol, also known as Serenity, may become the biggest event of the year for the industry. It will define the future of the second-largest cryptocurrency ecosystem by the market value and the protocol of choice for the overwhelming majority of decentralized applications.

Ethereum 2.0 is meant to become a self-sustaining financial ecosystem with a unique value. The much-awaited upgrade will bring many changes to the "world computer," making the network more scalable and secure. The blockchain will also switch from proof-of-work (PoW) to a proof of stake (PoS) consensus mechanism and create options of a passive income for ETH holders.

The new version will be launched on December 1, 2020. However, the transition to the new version is a complicated process that is not going to happen overnight. Moreover, there are several essential things to be taken into consideration to navigate through this period successfully.

1. The launch date can be changed

Ethereum 2.0 developers announced that they would start rolling out Beacon Chain, the critical component of the new version of the protocol, on December 1. However, this date is not carved in stone. Actually, it depends on whether the project secures the support of at least 16,384 validators with the total amount of 524 288 ETH staked in the network (over $200 million at the current exchange rate).

These conditions should be met at least one week before December 1; otherwise, the launch of Beacon Chain's genesis block will be postponed again.

A dedicated deposit smart contract launched on November 4 serves as a bridge between ETH 1.0 and ETH 2.0 as it allows users to send their coins from the current blockchain version to the new one and participate in the staking.

Over 57,000 ETH is already staked, which is about 10% of the required amount.

ETH 2.0 launchpad

ETH 2.0 launchpad

2 Two networks will coexist

Ethereum 2.0 will be launched as a separate network that will run in parallel with the first version of the protocol. It means that the Beacon Chain launch won't change the life of a regular ETH user overnight. They will continue interacting with their ETH-based applications and services as usual.

As the migration to the new protocol is too complicated, the developers decided to do it step-by-step to ensure that all services work uninterrupted and the whole ecosystem does not collapse if something goes wrong.

3. 32 ETH will be frozen for an indefinite timeframe

Ethereum 2.0 will allow users to earn passive income at around 7% per anum, which is a very attractive feature and a key difference from the existing framework.

However, to become a validator, the network participant shall transfer at least 32 ETH (about $14,700 at the current exchange rate) to the deposit smart contract. These coins will be effectively locked for an indefinite period, meaning that the user won't be able to get them back until the transition progresses to Phase 2, which is expected to happen in two years at the soonest.

The experts are concerned that this condition may discourage people from joining the network at the early stages because they will have to wave farewell to their money for an extended period. The value of their deposits may decrease over time if the ETH price goes down.

Also, as the total value of ETH locked in the network will grow, the deposits will become less profitable.

4. Scammers are all around

ETH users interested in staking their coins on the deposit smart contract and participating in Phase 0 deployment should be aware of many scammers trying to make people deposit coins via their links, websites, or applications.

The whole process is very complicated, and investors should do their due diligence before sending their money to a smart contract. The official validator deposit contract address is provided on the Ethereum 2.0 Mainnet website. Anyone who uses a different address is a scammer.

Prysm Eth2 Testnet

Prysm Eth2 Testnet

According to the information provided on the ETH 2.0 mainnet website, the developers urge ETH holders to use only eth2 launchpad utility at launchpad.ethereum.org

Do not send funds to any other contract, and do not send ETH directly to the contract. If you want to participate in eth2, use the eth2 launchpad launchpad.ethereum.org. Prysmatic Labs endorses this address as the recommended way to become an eth2 validator.

5. There are multiple clients for ETH 2.0

As Ethereum is a decentralized network, anyone can create their own software to work with ETH 2.0. Currently, four validator clients are listed on the official ETH launchpad website. They are Lighthouse, Nimbys, Prysm, and Teku. They all have their advantages and disadvantages, and users can pick the one that suits them best.

Basically, the variety of software providers creating apps for ETH 2.0 make the network more user-friendly, inspires healthy competition, and ensures that a single developer does not control the whole network.

Key takeaways

The launch of the Beacon Chain is the start of a big journey that will eventually transform the Ethereum protocol to a new, more secure, scalable ecosystem with advanced functionality. The rollout is scheduled for December 1; however, it depends on whether the project secures the required amount of coins and the support of over 16,000 validators.

To become a validator, users should deposit at least 32, which will be frozen on the new protocol that will run in parallel with the old chain. The stakers will be able to get their money back after the migration is complete.

There are currently four officially supported ETH 2.0 validators; however, the independent developers can create to interact with the new chain. The competition ensures that a single software provider does not monopolize the network.

ETH holders shall do their due diligence and avoid using unverified software or service as they may be scammers.

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