What do you need to know about Ethereum and Ethereum 2.0?
What do you need to know about Ethereum and Ethereum 2.0 before you buy Ethereum?
If you want to buy Ethereum, you must note the long-anticipated upgrade from crypto Ethereum 1.0 to Ethereum 2.0. With the upgrade to Ethereum 2.0, there are bound to be some major changes in how Ethereum operates. So, if this is the first time you’re learning about the Ethereum 2.0 upgrade, don’t worry.
This article will enlighten you on what you need to know about Ethereum 2.0 before buying Ethereum. By the end of this article, you should tell the difference, its impact on DeFi, and how its implementation will affect the price.
What is the difference between Ethereum and Ethereum 2.0?
Before buying Ethereum, two primary features differentiate Ethereum from Ethereum 2.0: shard chain and proof-of-stake.
Shard chain
The Ethereum network uses something called the Shard chain, whose objective is to improve the network’s throughput. On Ethereum 1.0, only a single shard chain consists of multiple consecutive, secure blocks, making it easy for the network to verify transactions. But on Ethereum 2.0, it is expected to run on multiple shard chains, which will lead to higher throughput and faster transaction speed. The downside of having only a single shard chain to verify transactions is that it affects its ability to process transactions fast.
Proof-of-stake
It is also worth noting that Ethereum 1.0 runs on proof-of-work, which is a consensus mechanism. Whereas Ethereum 2.0 will run on proof-of-stake. On Ethereum 2.0, the PoW consensus mechanism is changed to PoS because PoW requires more electricity and computer power to build blocks. But with the upgrade to PoS, the network will be more energy-efficient, experience better security, and be scalable. In other words, Ethereum 2.0 does not rely on electricity or physical miners to validate transactions; rather, it uses virtual miners.
Will Ethereum 2.0 replace Ethereum?
While it’s understandable if you think Ethereum 2.0 is a separate Blockchain and will most likely replace Ethereum 1.0. But in actuality, Ethereum 2.0 and Ethereum 1.0 are the same Blockchains. This means that Ethereum 2.0 will not replace Ethereum 1.0 since they are not different Blockchains in the first place. A more accurate way to see these two Ethereum is a merger. In other words, Ethereum 2.0 is an upgrade of the previous Ethereum 1.0 that we all know.
So, whether you like the upgrade or not, provided you want to keep using Ethereum for whatever reason that makes you want to buy Ethereum, you will have to use Ethereum 2.0. so, in a way, Ethereum 2.0 will replace Ethereum 1.0, but not in a way like they were different Blockchains, to begin with. Additionally, this upgrade will come with several updates to improve how Ethereum 1.0 operates.
What does Ethereum 2.0 mean for DeFi?
Another area of concern when we want to buy Ethereum is thinking about the Ethereum 2.0 upgrade and its impact on DeFi products. Ethereum, as we know, are known for their support of DeFi products, so with this upgrade, how will it change DeFi product’s support? Well, first, it’s important to say that the Ethereum 2.0 upgrade is a good thing for DeFi products. It is good that Ethereum 2.0 comes with several useful improvements to support more DeFi products. Moreover, Ethereum 2.0 will better support DeFi products and give fewer compatibility issues. The truth is that the benefits of Ethereum 2.0 on DeFi are limitless and a welcome improvement.
Will the implementation of Ethereum 2.0 affect price?
With the Ethereum 2.0 upgrade, there’s undoubtedly loads of excitement in the crypto space about what to expect price-wise. The excitement is because upgrades like this in the crypto space will impact technology and the value of the crypto. Ethereum 2.0 has a positive impact on Ether price. So investors who bought Ethereum before the launch of Ethereum 2.0 made a bunch of money through capital gain. Before the launch of Ethereum 2.0, Ethereum’s price was around $1900, but it hit an all-time high of $3483 at one point when it was launched. This is about 60% in growth, which is equivalent to growing $1000 to $1600. Moreover, the switch from the PoW consensus mechanism to the PoS consensus mechanism also contributes to the price rise of Ethereum.
