Ethereum 2.0 phases and updates explained

The first phases of Ethereum 2.0 will be launched in 2020. All your questions regarding Ethereum 2.0, the people and products behind the development, and the opportunities to get involved in staking and validating, are addressed here.

Ethereum 2.0, also known as Serenity, is an ambitious project for many years, whose goal is to create affordable programmable money for the world. Over the next few years, Ethereum will undergo numerous upgrades and branches to become the very comprehensive network that was described in the project’ whitepaper about 5 years ago.

Currently, the Ethereum network can handle approximately 25 transactions per second. Unfortunately, that amount of bandwidth is clearly not enough, given that Ethereum’s mission is to become a world computer for the next generation of applications. Fortunately, the network bandwidth will go through a lot of dramatic improvements in the months and years ahead. Developers will be presenting Ethereum 2.0 and a number of new scalability solutions — especially Sharding and Casper.

What is Sharding?

For you to have some idea of traditional blockchain architectures, usually every node (node) on the network must check and process every transaction (e.g. a fund transfer). If there are thousands of nodes in a system and each node has to check every transaction, this creates problems with latency and ultimately leads to inefficient transaction processing. It is believed that this kind of architecture by its nature limits the scalability of Layer 1 network.

Therefore, sharding, or segmenting, divides network processing into smaller parts — shards. A shard is a chain that consists of a cluster or cluster of checking nodes — so-called “validators”. As such, the nodes are responsible only for processing and validating transactions within their respective shards.

By passing transaction checking to multiple shards, the nodes will process a much smaller number of transactions, which will eventually result in increased scalability almost without sacrificing decentralization or security.

What is Ethereum Casper?

Unlike Ethereum 1.0 or Bitcoin, Ethereum 2.0 will use Proof of Stake (PoS). This is a system better known as Casper, designed to achieve consensus. Unlike PoW, which requires users — who are miners — to provide the processing power of their computers to secure the network, PoS requires users — who are validators — to literally stake their money, their cryptocurrency assets to secure the network. In practice, Casper will require a 32 ETH for the user to become a validator and be rewarded in the form of coins (ETH).

Ethereum 2.0 development plan:

  • Phase 0: Beacon Chain;
  • Phase 1: basic sharding;
  • Phase 2: sharding with EWASM (Ethereum Flavored WebAssembly);
  • Phase 3 and beyond: easy clients, cross-shard transactions, super-square sharding and all that.

Phase 0: Beacon Chain

The first step towards Ethereum 2.0 (Phase 0) revolves around the transition to a completely new blockchain — Beacon Chain. Beacon Chain is the basis for Ethereum 2.0 because it includes the initial implementation of Casper/PoS (not yet sharded), as well as several functions that act as a basic infrastructure for sharding in the future.

In addition, Phase 0 does not include functionality related to smart contracts or EVM (Ethereum Virtual Machine), as it is planned for Phase 2. Beacon Chain is mainly designed for:

  • managing validators and their stakes;
  • appointing an elected block applicant for each shard at every step;
  • organizing the validators into committees to vote for the declared block;
  • applying consensus rules;
  • applying the reward and penalty system to validators;
  • acting as the starting point at which the shards register their statuses to mediate cross-shard transactions.

Ethereum 2.0 uses a completely new blockchain. This means that the network will not be updated as a hardfork on an existing chain. More importantly in phases 0–2: all user transactions and smart contracts will still be performed on the Ethereum 1.0 PoW chain.

With this in mind, rewards will be distributed at all stages to both validators and miners in each respective chain (ETH 1.0 and ETH 2.0). Thus, the total emission level will be higher in the early phases of Ethereum 2.0 until it decreases gradually to 0–1 percent. Users interested in becoming Ethereum 2.0 validators during Phase 0 will transfer their Ethereum 1.0 to Chain 2.0 using a one-way deposit contract. This contract will burn the ETH 1.0 and release the new ETH 2.0 on Beacon Chain.

Phase 1: Basic sharding (without EVM)

After implementation of Beacon Chain, Phase 1 will add the basic structure of the sharding. Generally speaking, this phase in combination with the Beacon Chain will significantly improve network bandwidth and become an important milestone for Ethereum scalability.

However, we should not forget that this will be a basic implementation of the shard, and there are no smart contracts in it. Beacon Chain will be largely responsible for ensuring the construction, reliability and consensus of data in shards by performing so-called blobs (binary large objects).

In addition to this basic implementation, cross-references will also be introduced in Phase 1. Cross-references will allow to record and finalize the state of each shard on Beacon Chain. Ultimately, cross-references will serve as the basis for transactions between shards in later phases.

The current specifications of this implementation say that one beacon-chain will be able to support 1024 chains of shards, each containing 128 complete nodes (131,072 nodes in total). Thus, we can assume that the rate in Phase 1 will be no more than 4.19 million ETH.

These specifications are constantly being adjusted as further tests and studies are conducted. Some of the details and figures in this article may be outdated, because a lot of developers are working tirelessly, bringing Ethereum closer to Serenity.

Phase 2: Sharding with EVM/EWASM

Phase 2 is when Ethereum 2.0 plays at its full potential. At this stage, account balances, smart contract execution and other abstractions in the network are entered. The biggest improvement in Phase 2 includes EWASM (Ethereum Flavored WebAssembly) integration, which is the next WebAssembly-based Ethereum Virtual Machine (EVM) specification.

EWASM will enable faster code execution and provide an improved development environment. The main point of attracting developers to EWASM is to write smart contracts in C, C++, Rust and Go, not to mention access to available WASM development tools.

Another interesting development of Phase 2 is the “state lease”. This lease allows the network to charge for storage and requires users to pay EWASM for this “service”. This is a rather controversial implementation, one just has to consider that it can be implemented.

Phase 3 and beyond: easy clients, cross-shard transactions, super-square sharding

Unfortunately, everything behind Phase 2 is in an exceptional state of prediction and there is no reliable information about these phases. But the official Ethereum Sharding FAQ describes Phases 3–6. They will add a number of features that will reinforce Serenity and turn it into a fully scalable network that has always been anticipated. Among the implementations:

  • cross-shard-transactions;
  • light customers;
  • super-square sharding;
  • close ties.

Who works on Ethereum 2.0?

Since there are plenty of opportunities to change Ethereum on the horizon, there is no doubt that Ethereum 2.0 is being made by top-level players. Below is a graphical representation of the teams that are studying or developing the client for Ethereum 2.0

Serenity is a technically ambitious plan that should lead us to a true world computer. If the community can truly embody the network envisioned, the nature of a truly scalable smart contract network with a fairly diverse set of assets can attract developers, investors and users.

Be ready for a new age of the most ambtious project of crypto industry — join our fair crypto lotto and earn coins with blockchain!



Blockchain enthusiast developer and writer. I love video games, blockchain and the hot symbiosis of these two worlds.

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Jeffrey Hancock

Blockchain enthusiast developer and writer. I love video games, blockchain and the hot symbiosis of these two worlds.