Ethereum has decided to replace the terminology “Eth1” and “Eth2” with “execution layer” and “consensus layer”, respectively. According to the official Ethereum blog, “A major problem with the Eth2 brand is that it creates a broken mental model for new Ethereum users. They intuitively think that Eth1 comes first and Eth2 comes after. Or that Eth1 ceases to exist once Eth2 exists. Neither is true. By removing the Eth2 terminology, we save all future users from navigating this confusing mental model.
Below we take a look at the updates expected for the Ethereum protocol.
Ditch proof-of-work for proof-of-stake
Performance issues experienced by early blockchain implementations (including Bitcoin and Ethereum) can be attributed to the power-intensive processing needed to authenticate and track transactions.
The “proof of work” (POW) system of the Ethereum blockchain consumes a lot of energy. As Ethereum becomes popular, the more computational work it takes to verify the blockchain, and the more electricity its network consumes.
The consensus mechanism works by having computing nodes unanimously agree on account balances and the sequence of transactions. The verification process is made possible with the help of virtual miners around the world, who are reimbursed for their efforts.
POW is extremely inefficient and energy-intensive by design. Ethereum is slowly transitioning to a “proof-of-stake” (POS) system to address the scalability and environmental sustainability issues plaguing the POW system.
The POS consensus mechanism randomly selects miners or “validators” to verify the system. Validators must stake their crypto in exchange for an opportunity to validate new transactions, update the blockchain, and earn rewards. Unlike the POW system, the POS does not require miners to consume energy to solve the same puzzle, which greatly reduces resource consumption.
With the POS system, GPU acquisition will become unnecessary for miners.
The next version of Ethereum will also introduce a processing technique called “sharding”. This will fragment the main Ethereum blockchain into smaller chains called “shards”.
In the existing Ethereum blockchain, all information in the chain is verified by all participating nodes. This limits the processing speed of the system because it is limited by the speed of the slowest node, thus increasing the transaction cost and reducing production.
The blockchain will be split into 64 chunks so that each node will only have to manage 1/64th of the usual blockchain size. This will distribute the compute and storage workload. Therefore, each node does not have to independently handle all of the network’s transactional load. Instead, it will only contain the data related to its “fragment”. This will allow the entire blockchain to use parallel processing, greatly increasing overall capacity.
Replace EVM with eWASM
The Ethereum Virtual Machine (EVM) facilitates the use of smart contracts. Smart contracts can be used to operate games, administer elaborate financial transactions, or even manage social networks.
A transition from EVM to eWASM (WASM stands for WebAssembly) is a major update in the next iteration. EVM was designed to emphasize accuracy rather than efficiency. According to Ethereum lead developer Nick Johnson, EVM is “optimized for theoretical purity rather than practical use.”
Replacing EVM with eWASM will increase the speed and efficiency of the Ethereum blockchain. WASM was developed for the web and will allow Ethereum application code to run directly on existing web browsers. Programmers will be allowed to choose languages, such as Rust and C, to run code on the blockchain. This will open up Ethereum to more programmers or validators by removing their need to learn a native language limited to Ethereum.