Ethereum is the leading smart contract-enabled blockchain and it has big plans for 2022. One of the most anticipated event is Eth2, which should hopefully launch soon. On August 5, 2021, EIP-1559 went live on the Ethereum network. This upgrade is the largest improvement to Ethereum in a long time, and it's got everyone wondering, when will Ethereum 2.0 launch?
Currently, Ethereum is a proof-of-work (PoW) cryptocurrency, meaning its network is secured by energy-intensive hashing algorithms. Other cryptocurrencies like Bitcoin, Litecoin and Dogecoin also use PoW consensus, but this model drastically reduces the blockchain’s capacity. Some speculators go as far to say that PoW is antiquated technology due to the limitations that the consensus model presents.
ETH2 will be the most monumental upgrade to come to Ethereum’s blockchain. It will change the way Ethereum’s network is secured, allowing for a much higher transaction throughput as well as significantly reduced transaction costs. Plus, Eth2 will reduce Ethereum's issuance rate from 4% to 0.4% annually. Paired with the fee burn EIP-1559 has implemented, Ethereum is likely to become more scarce over time.
What is Ethereum?
Ethereum is one of the largest cryptocurrencies by market capitalization, second only to Bitcoin. While both Bitcoin and Ethereum use blockchain technology to secure their networks, they aren’t direct competitors. Bitcoin aims to be a store of value –– you can think of Bitcoin as digital gold. Ethereum is touted as a "general purpose blockchain" which can host limitless functions. As of now, decentralized finance (DeFi) applications are the most popular use case for Ethereum.
The most notable advantage that Ethereum has over Bitcoin is its smart contract capability. Smart contracts are code that’s uploaded to the blockchain, making the code immutable and uncontrollable by a 3rd party. Smart contracts are currently being used for decentralized exchanges (DEXs), lending, insurance and many other financial functions.
If you’re active in the cryptocurrency space, you may have heard about Ethereum gas fees. Gas fees are needed to use Ethereum’s blockchain, and these fees are calculated based on the computational power needed to execute functions on the blockchain. For example, you’d need to pay a small amount of gas to send a transaction, but you’d need to pay higher gas fees for functions like swapping crypto, deploying code and providing liquidity.
What is DeFi?
DeFi is short for decentralized finance. It’s an innovative new field within blockchain technology and it allows users to conduct financial functions without using a centralized 3rd party like a bank or cryptocurrency exchange. This was the whole point of Bitcoin but BTC just doesn't have the functionality to facilitate many kinds of financial tools like lending, borrowing, staking and more. That's where Ethereum comes in.
Most of DeFi is built on Ethereum — it's the largest blockchain network that supports smart contracts. While this is currently the case, competitors like Cardano (ADA) and Binance Smart Chain (BSC) are attracting many new users due to their low transaction costs compared to Ethereum.
The DeFi industry is growing fast, and many projects have gained significant attention due to their unique benefits over centralized financial services. The rise of DeFi has been a significant cause of Ethereum's congestion problem that makes Ethereum 2.0 necessary. DeFi users and NFT traders have been wondering when Ethereum 2.0 will launch for a while now. Here’s a quick overview of some of the leading decentralized finance projects on the market today:
- Uniswap is the leading decentralized exchange on Ethereum. Users can anonymously trade cryptocurrency directly from their crypto wallet, so there’s no need to trust a centralized exchange to hold custody of their funds.
- Chainlink is also built on Ethereum, and it seeks to connect real world data with the blockchain. It does so through oracles, which you can learn more about on Chainlink’s website.
- Wrapped Bitcoin is essentially just Bitcoin on Ethereum’s blockchain. Each WBTC has a traditional BTC backing it, ensuring that these 2 currencies can be pegged to each other. Being able to own Bitcoin on Ethereum allows you to interact with any DeFi programs on Ethereum, such as Uniswap, Aave and Compound.
- Aave is a decentralized lending platform on Ethereum. It allows users to take out collateralized loans without needing approval from a lending institution. Instead, you must collateralize the loan with cryptocurrency, which will be taken if you default on your loan.
- PancakeSwap is the leading DEX on Binance Smart Chain. Since BSC is already proof-of-stake, the network fees are significantly lower than Uniswap, which uses Ethereum’s network.
Proof-of-Work vs. Proof-of-Stake
The underlying upgrade on ETH2 is the shift from proof-of-work (PoW) to proof-of-stake (PoS). As mentioned previously, PoW involves cryptocurrency miners that use immense amounts of electricity to solve complicated problems in exchange for mining rewards. In contrast, PoS will secure Ethereum’s blockchain through validators that hold a financial stake in the network.
There are plenty of benefits that come with proof-of-stake consensus. Most notably, Ethereum will be able to scale much more effectively as a PoS coin. Transaction fees will be around 1% of what they are today, and Ethereum will be able to process many more transactions in the same amount of time.
Also, proof-of-stake will make Ethereum an eco-friendly blockchain. Proof-of-Work cryptocurrencies use a ton of electricity –– Bitcoin miners use more energy than most small countries, and the amount of energy is only growing. The energy consumption of Ethereum is one of its weakest points and it will be reduced by more than 99% after the Merge.
One aspect where PoW beats PoS is security. Generally speaking, PoW coins are more secure than PoS coins, as it’s extremely hard to acquire 51% of a network’s computational power (needed for a 51% attack). Because of this, Ethereum developers are working hard to create a decentralized and secure PoS system on the ETH2 testnet before deploying the upgrade to the Ethereum mainnet.
The other major upgrade for ETH2 is sharding. 64 new blockchains, or "shard chains", will be launched to run in parallel with the Ethereum mainnet. These new chains will drastically increase Ethereum's throughput, and ideally lower the gas fees by increasing the supply (capacity) of the network.
Where to Buy Ethereum
Since Ethereum is such an established cryptocurrency, most dedicated cryptocurrency exchanges support the token. The best trading platform for you depends on your needs as an investor. If you’re simply looking for the lowest fees, Robinhood is your best option.
Robinhood recently enabled users to send cryptos in and out of your Robinhood Crypto wallet so you can now interact with DeFi programs after using the platform. Some great options for beginners that also allow you to send and receive Ether tokens include Webull and eToro.
Cryptocurrency is offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk.
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.
How to Stake Ethereum for Interest
With proof-of-stake, you can stake your Ether tokens on Ethereum’s blockchain to become a validator. Investors are incentivized to do so, as they can earn interest on their cryptocurrency through staking Ether tokens on the network.
Staking allows you to earn between 6% to 8% annual interest on Ethereum. This interest is paid in Ether tokens, so you’ll be earning an effective interest rate higher than 8% if Ethereum appreciates. So, if Ether goes down in value, then the interest you earn will effectively be less. If you believe Ethereum will succeed over the long term, then staking is a great way to grow your crypto portfolio.
You can stake your Ethereum with Uphold for up to a remarkable 4.25% interest right now.
Terms Apply. Cryptoassets are highly volatile. Your capital is at risk.
When Will Ethereum 2.0 Launch?
Everyone in crypto wants to know when Ethereum 2.0 will launch. It could inspire a massive resurgence in Ethereum and maybe Bitcoin too! In short, ETH2 will be released when the developers are confident in the network’s security. The testnet, also known as the Beacon chain, is live, and billions of dollars in Ether tokens are already staked on it. The upgrade has been in the works for years; the initial release was slated for November 2020. The testnet went live in December 2020, but we only recently got a release date for the merge. As per the most recent updates, the merge is set to come out in mid September of this year, sometime around the 15th. This is the firmest date the Ethereum community has gotten so far. Take this with a grain of salt, however, as the merge has seen tons of delays so far.
The Ethereum Foundation is taking its time to make sure the network is as secure as possible. This reason explains a bulk of why the release date has been pushed back so much as developers want to make sure the network is safe from malicious attacks and that the code is consolidated. Hopefully, we’ll see a proof-of-stake Ethereum by mid-September.
Is Ethereum a Good Investment?
Most cryptocurrency enthusiasts believe Ethereum is a good investment. Once it is announced when Ethereum 2.0 will launch, it may be even easier to determine if ETH is a good investment. ETH 2.0 could make Ethereum a great investment fast if it sees the resurgence many experts are expecting. Looking at the past price movements of ETH, the asset has outperformed Bitcoin, making it an extremely lucrative investment for any investors who’ve gotten into Ether before the beginning of the year. Ethereum’s network is far from its final form, and investing before ETH2 may turn out to be a great investment opportunity.
Frequently Asked Questions
What's the main difference between Eth and Eth2.0?
Eth2.0 will be a upgrade to Ethereum’s current blockchain. Ethereum 2.0 aims to improve speed and efficiency. In order to do this, Ethereum 2.0 will change their proof of work mechanism to a proof of stake mechanism.
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