Ethereum has consistently followed a roadmap for its continual evolution to a proof-of-stake consensus protocol, and 2020 saw the groundwork for Ethereum 2.0 soundly laid. The smart contract blockchain has firmly established itself as a platform backed by the second-most valuable cryptocurrency in the world, Ether (ETH), and has become a primary resource for developers to build blockchain-based applications and tools.

The emergence of the decentralized finance sector has been largely built on top of the Ethereum blockchain, adding credence to the platform’s decentralized functionality. The surge in the use of the blockchain has come at a steep price though, as network speed and transaction costs are directly affected as more users and platforms are added to the blockchain. This is a driving force behind the transition to Eth2, which is already underway.

There seems to have been plenty of positive sentiment toward the ongoing shift to Eth2 in 2020, and there’s a sense of great anticipation for the project at the dawn of a new year. So, what are the main hopes for the next step in Ethereum’s evolution in 2021?

Eth2, in a nutshell

Ethereum 2.0 is the next step in the blockchain’s move from a proof-of-work consensus protocol to a proof-of-stake algorithm. This is an integral part of Ethereum’s development to make the blockchain more scalable, secure and sustainable. The goal is for it to support thousands of transactions per second in order to make applications faster and cheaper to use.

Security is a chief concern, and a move to proof-of-stake needs to ensure that the protocol is more secure against all forms of attack. Last, but not least, the shift away from PoW is integral in limiting the environmental effect the Ethereum network has. The network, in its current state, requires a lot of computing power and electricity to remain sustainable.

The first phase is the Beacon Chain, which is responsible for introducing PoS to the protocol and was launched on Dec. 1, 2020. Eth2 users can now stake ETH and become a validator of the network. Being a full validator requires users to stake 32 ETH and will see those users process transactions and create new blocks on the chain. This is imagined as the future of securing the Ethereum network and will eventually replace the current energy-sapping PoW consensus mechanism.

With the Beacon Chain live, the next step is the launch of shard chains, which is earmarked to take place sometime this year. Without getting into the finer details, sharding allows a database to be split up to spread workload. Ethereum will use shard chains to reduce network congestion and increase transaction speed. It will also greatly reduce the hardware requirements of running a node. The plan is to create 64 shard chains.

The Beacon Chain will eventually assign certain shard chains to various validators, which will spread out the work needed to validate the Ethereum blockchain. The first iteration of these shard chains won’t handle transactions or smart contracts but will store and manage data on the network.

The long-term goal is to combine shards with rollups, which essentially bundle transactions off-chain to be subsequently submitted back to the mainnet. This should greatly improve the transaction processing capability of the Ethereum network.

A vote of confidence

Cointelegraph reached out to a couple of individuals working at the front line of Ethereum’s ongoing development. Ben Edgington, lead product owner of Teku — an Eth2 client created by ConsenSys and designed for enterprise and institutional stakers — has been directly involved in the research and development of Eth2.

A major talking point of the ongoing shift to Eth2 has been the amount of ETH staked in the Beacon Chain contract. Edgington told Cointelegraph that the community’s willingness to participate in staking has been very positive for developers:

“The amount ETH already staked is an immense vote of confidence, not only in the Beacon Chain, but also in the future of Ethereum. I am impressed by how much has come in so quickly, and greatly encouraged by the commitment of the Ethereum community to what we have built, and will be continuing to build.”

Edgington added that the launch of the Beacon Chain was arguably the most difficult part of the Eth2 project and was a huge milestone that has boosted confidence for the upcoming stages in Ethereum’s journey.

Viktor Bunin, protocol specialist at blockchain infrastructure provider Bison Trails, told Cointelegraph that the ongoing staking of ETH shows there’s a lot of support from the community in the future of the protocol, adding:

“I was surprised that the inflows have continued to be so large and think there’s a chance that the queue to enter Eth2 does not run dry for all of 2021, meaning there is always a wait for a validator to join the network because so many are trying to join simultaneously.”

Lubin and Buterin have high hopes as well

In early December 2020, ConsenSys founder Joseph Lubin suggested that the transition to the next phase of Eth2 could happen faster than expected, given that the Beacon Chain was live. “People in the know around the ecosystem are very optimistic about how fast things could unfold, as the really complicated work has been done in launching Phase 0,” Lubin said during the “Ethereum in the Enterprise — Asia Pacific 2020” conference.

Lubin added that the Ethereum Foundation is expecting shards to drastically improve data availability on the Ethereum blockchain when they are deployed. He went as far as saying that Eth2 could absorb Eth1 “in the not too distant future.”

Ethereum co-founder Vitalik Buterin gave some insights into the ongoing development of the ecosystem in an online meetup hosted on YouTube by Ethereum Buenos Aires on Dec. 29, 2020. He highlighted key goals for the Ethereum ecosystem in the coming 12 months. A primary concern is the current cost of transactions on the blockchain, which Buterin said is still a sticking point: “We need to be working very hard on making sure that there’s more space for transactions so that we don’t have this dynamic where everyone is bidding for a very small amount of space so that only very few transactions can get in.”

Buterin also said that the aim for Ethereum is to be able to support hundreds of millions of users within the next few years, but right now, the blockchain can only support 15 to 45 transactions per second.

Buterin then went through a medium-term scalability roadmap and highlighted the potential for rollups to allow the network to process 1,000 to 4,000 transactions per second. When Eth2 sharding and rollups are deployed together, Buterin highlighted the potential for 25,000 to 100,000 transactions processed per second.

The Ethereum co-founder closed by saying that by the end of 2021, he hopes to see the current development roadmap of both the Eth1 (PoW) and Eth2 (PoS) chains completed and to have testnets running for the complete integration of the two chains along with sharding capability, adding: “Potentially, the light client support for the proof-of-stake chain even before the merge could be used to provide better light client support for the proof-of-work chain.”

Ethereum developers trust the process

According to those involved, a common theme that has emerged during the ongoing evolution of Ethereum has been a focus on quality. Although timelines have been established, developers have been more concerned with building and implementing upgrades that are not rushed.

Bunin told Cointelegraph that various Ethereum users, developers and companies that he’d been in contact with over the past few years have expressed unhappiness with the length of time it took to launch the Beacon Chain but that they were excited by the news of the launch:

“They did not take shortcuts with the Phase 0 design and were not afraid to go back to the drawing board after failed attempts or upon discovering new optimizations. They will and should continue to optimize for the best design rather than speed of execution.”

As Buterin mentioned in December 2020, the roadmap for 2021 includes development goals for both Eth1 and Eth2. The latter includes work on shard chains, which promise to improve the scalability of the protocol. Edgington said he was hoping to see shard chains launched by the end of the year but that it will be dependent on the sheer scale of work to be done in 2021:

“The design for sharding is well advanced and I expect we’ll make excellent progress towards implementing it this year. I’d personally hope to see shard chains launched in 2021, but we don’t yet have a target date. In addition, we have brought forward the merger of Eth1 and Eth2 in the roadmap, so we will be working on that in parallel with sharding.”

There is no denying that there is pressure to deliver these performance-improving upgrades in 2021. DeFi was a major subject in 2020 and has added some strain to the Ethereum blockchain. However, Edgington reiterated the view that the community of developers would not be reactive to these kinds of pressures in their approach in the new year: “There’s always been a sense of urgency, irrespective of DeFi! [...] The tension between doing things right, and doing them quickly is always present, but I feel that we are in a reasonable place.”

Bunin also believes that the development of shard chains won’t necessarily be expedited and said that developers’ mindsets are optimized for quality because they “are building the financial infrastructure of the next century.” He added: “My expectation is that shard chains will be launched by the end of 2021, but I am also comfortable if they are delayed.”