After the release of Vitalik Buterin’s 2020 roadmap, there was turmoil around Ethereum: will there be an Ethereum 2.0 and what would it look like? We now know that Ethereum 2.0 is not a new network, but rather includes several upgrades from ETH1. The upgrade aims to improve the speed, efficiency, and scalability of the Ethereum network so that it can process more transactions and eliminate bottlenecks. Since the name “Ethereum 2.0” has caused misunderstanding, Ethereum.org now refers to it as ‘execution layer’ (ETH1) and ‘consensus layer’ (ETH2). Both are part of the Ethereum network.
Proof-of-Work vs Proof-of-Stake
While Ethereum 1.0 uses a consensus mechanism known as Proof-of-Work (PoW), Ethereum 2.0 will use a Proof-of-Stake (PoS) mechanism. These changes and more can be found explained here.
The roadmap, dubbed “Ethereum 2.0,” has since been renamed, but the planned changes to the network remain.
Ethereum.org explains the overarching principle of the new Ethereum layer:
“Proof-of-stake is done by validators who have staked ETH to participate in the system. A validator is chosen at random to create new blocks, share them with the network and earn rewards. Instead of needing to do intense computational work, you simply need to have staked your ETH in the network. This is what incentivises healthy network behaviour.”
Without a large distributed network of validators, Proof of Stake is less secure than Proof of Work (PoW) algorithms. PoW algorithms adjust their difficulty level based on the total hashpower securing the network, so solving the problem always takes about the same amount of time.