Ethereum 2.0 is coming – Here’s what you NEED to know

Ethereum 2.0 is an upgrade to the Ethereum Network which improves the speed, efficiency, and scalability of the network. This will take Ethereum to new heights as it will be able to drastically more transactions, alleviating congestion, and high gas costs on the Ethereum network. Upon reaching the final phase of the upgrade, Ethereum will meet her goals of becoming a transparent and open network for decentralized applications and finance (DeFi). This article breaks down the roadmap for this upgrade, including major economic changes that will come with the introduction of a new ETH 2.0 token.

For everything you NEED to know about the Merge, including how to obtain any ETHW/ ETHPOW airdrops, check out our video!

Ethereum Merge: ALL you need to know (including ETHPOW/ ETHW)

Ethereum 2.0 has recently gone through some changes- it is now called the Ethereum Merge. Check out our latest article- Ethereum ($ETH) Merge: What is it and everything you need to know

Ethereum 2.0 will involve sharding to drastically increase network bandwidth and reduce gas costs, making it cheaper to send Ethereum, tokens, and interact with smart contracts. There will be fundamental economic changes too, Ethereum 2.0 will allow supports to staking nodes and earn Ethereum as passive income. In many ways, Ethereum 2.0 is the combined effort of thousands of developers who worked for years.

The Ethereum 2.0 upgrade will be done in 3 distinct phases starting with Phase 0 (after all, developers count from 0 instead of 1). Over the past few years, opponents of Ethereum have often criticized the network’s high transaction costs and fragility during peak usage. Will Ethereum 2.0 be able to fix this problem? Will Ethereum scale to support the huge number of Decentralised Finance (DeFi) and Blockchain games? This guide will cover the timeline for the upgrade to ETH2.0 and the solutions proposed.

Key Features of Ethereum 2.0

  • Efficiency – Ethereum will become 99.95% more energy efficient. It is estimated that seucring the network with Proof of Stake will no longer require an entire country’s worth of power.
  • Sharding – Ethereum will be broken into 18 “Shards” that operate simultaneously. This will drastically improve efficiency.
  • Staking – Ethereum will move to Proof-of-Stake Consensus, so everyone can stake and help secure the network.
  • Security – Compromising the network will become much more expensive under Proof-of-Stake. 51% attackers will also be easily identifiable with validator addresses and can be forked away from the network if there is an attack.

The 3 phases of Ethereum 2.0

Ethereum 2.0 will be launched in 3 phases:

  • Phase 0- Beacon Chain
  • Phase 1- The Merge
  • Phase 2- Sharding

Phase 0: Beacon Chain

On 1st December 2020, the Beacon Chain was officially launched. This introduced Proof-of-Stake to the Ethereum ecosystem but does not change how we currently use Ethereum. The purpose of the Beacon Chain is to coordinate the Ethereum network and serve as the consensus layer. It also acts as a crucial precursor to upcoming phases such as sharding.

Learn more with our Ethereum mining guide and learn how to stake Ethereum 2.0 on Allnodes.

Phase 1: The Merge

The Beacon Chain (also known as the “consensus layer” and formerly known as “Eth2”) is already live. The consensus layer already exists as a separate chain from the existing Mainnet (i.e. the “execution layer”, formerly known as “Eth1”). The Merge is the next step. The current proof-of-work algorithm on the execution layer will be replaced with the proof-of-stake consensus protocol on the Beacon Chain.

Hence this stage is known as “The Merge”. This is because there will be a “merge” of the new consensus layer with the existing execution layer. This will also stop the use of Ethereum mining.

The Merge will have a profound impact on the carbon footprint of the Ethereum network as it will now be a lot more energy efficient. It will also set the stage for future upgrades to the scalability of Ethereum such as sharding.

The Ethereum Merge is expected to be in mid-September 2022.

Phase 2: Sharding

By then, the Beacon Chain has already been launched and merged with the Ethereum Mainnet. The next stage will introduce sharding to the Ethereum Network.

Sharding on Ethereum means the database would be split horizontally to spread the load. Sharding will work together with layer 2 rollups. This divides the burden of handling large amounts of data needed by rollups over the entire Ethereum network.

Ethereum Sharding is expected to be released in 2023-2024.

Main features of sharding:

  • Everyone can run a node: Validators will no longer need to store all the data themselves. This drastically reduces the cost of storing data on layer 1 by reducing the hardware requirements.
  • More network participation and security: With sharding, you will be able to run Ethereum on a laptop or phone. This means more participation, greater decentralization, and more security.

What are layer 2 rollups?

Layer 2 rollups are an existing “layer 2” technology. This allows decentralized applications (dApps) to “roll up” transactions into one off-chain for submission. The effect of this is that it reduces the data needed to execute a transaction.

The combination of layer 2 rollups and sharding is what will achieve a transaction speed of 100,000 tps.

Learn more: Understanding layer 2 & scaling solutions: Arbitrum, Boba, Optimism, Polygon, Ethereum 2.0

ETH2 Multi-client network testnet

Ethereum 2.0 is a multi-lab and group initiative. To keep Ethereum decentralized, different labs and companies are developing their own implementation of ETH 2.0 clients. This means there are multiple codebases that all communicate with the same protocol. Eventually, Ethereum will be able to support multi-clients that are all able to communicate with each other via the multi-client network.

On 28th of April 2020, Prysm and Lighthouse released a multi-client testnet for Ethereum 2.0. This test allowed ETH2 clients developed by different labs (such as Prysm, Lighthouse or Casper) to communicate with each other.

Testnet incident

On 14th August 2020 “Medalla” went through several incidents which stressed the testnet (read more here). A subsequent Ethereum blog stated that “Prysm nodes lost track of time when one of the time servers…suddenly jumped one day into the future”. This created a cascade of events which eventually lead to major fixes. This was viewed positively. As Danny Ryan said, “I can honestly say that client software is much more robust following this incident.”

This incident urged developers to note that client diversity is crucial for the future of ETH2 and its decentralization. Epecially since if more than 33% of validators go offline at the same time, epochs cannot be finalized anymore.

How to set up an Ethereum Validator Node

Check out our LIVE demonstration on how to set up an Ethereum 2.0 Node.

In addition, I’ve also set up something called a validator node for Ethereum 2.0. These nodes will be how Ethereum would run and how transactions are going to be validated in the future. So we’re going to explore all of these concepts as well in this guide.

Currently you can test out Ethereum staking on the ETH 2.0 Testnet set up by Prysmatic labs (aka Topaz). Since it’s a test, Ethereum will not be used, instead it will use Göerli ETH, a free testnet version of ETH.

Time needed: 2 days.

Setting up an Ethereum Validator Node
This guide has been adapted from the Prysm ‘Topaz’ Testnet Guide

  1. Get some Göerli ETH

    Göerli ETH is free to obtain and will be used to stake the 32 ETH required for the node. The easiest way to obtain the Göerli ETH is to use the social faucet.

  2. Spin up a Server

    You’ll need to be familiar with running a VPS server (you can use AWS, Hetzner or Linode). Recommended specs include an Intel Core i7 processor with 100 GB of SSD storage

  3. Start your Beacon Node

    Easiest way we found to do this is via Docker
    docker run -it -v $HOME/prysm/beacon:/data -p 4000:4000 -p 13000:13000 \ gcr.io/prysmaticlabs/prysm/beacon-chain:latest \ –datadir=/data

  4. Generating a validator keypair

    docker run -it -v $HOME/prysm/validator:/data \ gcr.io/prysmaticlabs/prysm/validator:latest \ accounts create –keystore-path=/data

    Complete the steps here to stake the ETH

  5. Starting up the validator client

    docker run -it -v $HOME/prysm/validator:/data –network=”host” \ gcr.io/prysmaticlabs/prysm/validator:latest \ –beacon-rpc-provider=127.0.0.1:4000 \ –keymanager=keystore \ –keymanageropts='{“path”:”/data”,”passphrase”:”changeme”}’

  6. Finish the activation

    Wait (roughly 2 days) to get activated, and then you’re good to go!

Staking Ethereum on a validator node

Ethereum 2.0 Staking rewards

Ethereum 2.0 will migrate to proof of stake consensus. In the above paragraph “Phase 0- Beacon Chain” we mentioned that the community can stake 32 ETH on validator nodes. The staked 32 ETH2 is used to validate the transactions and states on the network. It also acts as a guarantee that the validator node will be honest and operational. In return, stakers will be rewarded with Ethereum.

This means that validators will generate Ethereum as passive income and receive ETH payouts slowly over time. Current calculations of Ethereum 2.0 staking show an annual 14.2% Return on Investment (ROI).

This will be great for those who stake ETH. This is because they can enjoy the benefits of passive income whilst personally holding their funds on the validator node. Analysts predict greater demand for ETH once proof of stake is implemented. This is due to additional demand for ETH from staking and validator nodes. Whilst at the same time, reduced demand for GPUs as Ethereum mining will eventually be phased out.

Beacon Node status showing Income and Attestations

You can see the status of our Ethereum validator node in the image above. We had some initial downtime for the node, so we actually lost 0.01333 Ether. This was a penalty for missing our votes. So it is important to remember that votes are mandatory once a node is activated. An offline node will mean that votes are missed, resulting in a penalty of loss of ETH.


Ethereum Staking: Deposit contract address release

On 4th Nov 2020, with a new blog post and quietly while everyone was following the U.S. Election’s live results, the required specifications of ETH2 v1 and the Mainnet Deposit Contract Address for staking have been released. ETH2 users can now stake their ETH and become validators to help secure the network.

It’s important to remember that it is not possible to simply send ETH to the contract. This will result in your transaction failing. You need to go through the launchpad and follow the guide. Moreover, as we stated previously, staking and running a validator requires effort, time and technical expertise. Failing to meet requirements can result in loss of part of, if not all, your ETH as penalties add up.

Ethereum Staking Update: Returns?

As of June 2022, my validator node balance is at 35.45202. This means I have earned around 3.45 ETH since setting it up 2 years ago. Note that results may vary. Those who set up their node earlier (as was in my case) were able to enjoy 16% APY.

Progress of Ethereum 2.0 so far

Beacon Chain launched

Ethereum 2’s Beacon Chain was launched on 1st December 2020, instead of early 2021 as previously anticipated.

To trigger the Beacon Chain launch, there had to be at least 524,288 ETH (16384 validators), in the deposit contract 7 days before 1st December 2020. If this wasn’t met, the event would have been automatically triggered 7 days after the requirement was satisfied. On 24th November 2020 and hours before the deadline, the threshold of staked ETH required to trigger the launch of Ethereum’s Beacon Chain was met!

Beacon Chain goes live on 1st December 2020

On 1st December 2020 at 12pm UTC the Ethereum Beacon Chain went live. This day marked the beginning of a new era for Ethereum and also a new ATH for Bitcoin prices. Check out our video on the successful launch of the Beacon Chain.

More than 2 million $ETH staked since Beacon Chain went live

The number of staked tokens has significantly increased. As at 27th July 2022 13,833,048 $ETH has been deposited in the contract address. This equates to nearly $19 billion dollars in value. The number of active validators is 410,514 and 205 pending validators and a Participation Rate of over 99%. This indicator, which measures ETH2’s network health, shows the number of validators actively participating in the consensus mechanism. A good rate would be always above 80-90% to ensure the security of the chain.

Unlike before, Ethereum 2 proceeds in epochs (32 blocks), every 6.4 minutes (if no abnormalities are detected). You can always check this metric here: beaconscan.com/epochs.

How has the price reacted to the launch of ETH2?

Ethereum’s value has basically doubled since Phase 0 Beacon Chain launched. On 1st December 2021, prices hovered around $600. Nowadays, prices are usually over $1,500.

What is the current state of Ethereum 2.0?

The 3 upgrades since the Beacon Chain launch

3 upgrades have been introduced since the launch of the Beacon Chain on 1st December 2020: the Berlin upgrade, London upgrade, and Altair upgrade.

Berlin upgrade

On 15th April 2021, the Berlin upgrade was launched and it optimized gas costs for some EVM (Ethereum Virtual Machine) actions. The upgrade also increased support for several transaction types.

London upgrade

On 5th August 2021, the London upgrade was launched and notably bought about a reformation of the transaction fee market for the ETH 1.0 chain via EIP-1559. It also removed or reduced gas fees for specific functions.

Learn more about the London upgrade: Ethereum 2.0 London hard fork rollout.

Altair upgrade

On 27th October 2021, the Altair upgrade was launched and is the first scheduled upgrade for Ethereum’s Beacon Chain. It added support for “sync committees” which enabled light clients, bring validator inactivity, and slashed penalties up to their maximum values.

Göerli Final Testnet Merger Goes Live

On 11th August 2022, Göerli went live as the third and final testnet merge before the Merge scheduled for mid-September 2022. The previous two testnet merges, Ropsten and Sepolia, were also largely successful.

The Göerli merger requires node operators to update their consensus and execution layers simultaneously. This was the final testnet (rehearsal) merge of the Ethereum mainnnet to the Beacon Chain, and consequently a transition to a proof-of-stake consensus mechanism.

Those who held or staked ETH were unaffected.

ETH price predictions leading up to The Merge?

Ethereum prices reacted positively to the announcement of the Goerli merge. Pre-announcement, prices were already nearly US$1,600. Following the announcement, prices shot up further and above US$1,760. The news of the then incoming Merge however resulted in a huge price volatility with ETH prices trying (and then failing) to stay at above US$1,700 levels.

On the other hand, there are those who are less optimistic. In a Cointelegraph interview, Markus Thielen, Chief Investment Officer of Singaporean asset manager IDEG expressed caution. Thielen believes ETH could be headed towards a consolidation phase with ETH prices reaching a “technical resistance at $US1,800 whilst the Fed is reducing the supply of reserves (and thus liquidity) through quantitative tightening (QT). Thielen also observes that interest in the Merge is waning based on Google search results. However, on a positive note, a consolidation period before the Merge i.e. a drop in prices into the end of August 2022 can lead to buying opportunities.

Thielen believes what will happen to ETH prices following the Merge would depend on the speed of adoption. However, with The Merge not going to have any effect on gas prices, adoption may be slow initially, which means a slower increment in ETH prices.

If there is a fork following the Ethereum merge, ETH prices may drop. This is because people may not see much reason to continue holding onto ETH once they received their ETHW/ETHPOW airdrop.

ETH Merge has been successfully launched!

On 15th September 2022 at 06:42:42 UTC at block 15537393, the Ethereum Merge was completed. This meant a merger of the Ethereum mainnet execution layer and the Beacon Chain’s consensus layer. Thus putting an end to the proof-of-work consensus mechanism.

Missed our historical LIVE Merge party? Check it out here!

How have Ethereum ($ETH) prices reacted to the Merge?

Ethereum ($ETH) prices showed a slight pump in the hours following the Merge. Prices hit a peak of over US$1,640 before coming back down to just under US$1,600. The next crucial point in terms of where ETH prices would go would depend on whether there is any hard fork.

Will there be an Ethereum hard fork after the Merge?

A hard fork is a backward compatible and permanent split or fork of the blockchain. After a hard fork, a separate version of the blockchain will emerge, and a new cryptocurrency token. There is speculation that the Merge may result in a hard fork. This is because some want to take advantage and profit from the Merge. Alternatively, a hard fork may be formed by those who disagree with the direction of Ethereum’s development.

A group known as ETHW Core announced they will launch a hard fork within 24 hours of the Merge. This is because they oppose the change to a proof-of-stake mechanism, which essentially put an end to ETH mining.

Several hours after the Merge, the ETHW mainnet and fork of the Ethereum blockchain was launched.

However, there is not a lot of optimism about the success of potential Ethereum hard forks. Some blockchain oracles, e.g. Chainlink, have announced they will stay with the blockchain supported by the Ethereum Foundation. This will negatively affect any dApps running on any forked Ethereum blockchain.

Meanwhile Aave has proposed a governance vote whether Aave should “commit” to using Ethereum’s PoS consensus when launched.

The lack of support from projects means that any tokens or NFTs on the forked Ethereum chain will less likely be accepted in marketplaces or DeFi applications. In turn this would affect investors who are looking to profit from trading these assets.

ETHW prices since the Ethereum fork?

At the time of the fork, ETHW prices rallied from US$35 to 60 in mere hours. However prices are currently at around US$13. This has led many to complain that ETHW was “dead on arrival”.

What is the ETHPOW/ ETHW token?

In early August 2022, a group of crypto miners known as ETHW Core launched a campaign opposing the Ethereum Merge. This is because ETH mining will end after rhe Merge. Their solution is to fork the Ethereum network and create an alternative and still-minable form of ETH known as ETHPOW or ETHW. The token has not been launched yet. It will only be launched if there is a successful fork of the Ethereum network after the Merge.

Notwithstanding the ETHW token does not exist yet, some cryptocurrency exchanges are already listing an IOU version of ETHW. Hence traders can already begin speculating on the price of this non-existent token. Currently, this IOU token cannot be withdrawn or traded across exchanges. If the fork succeeds, the ETHW (IOU) token will materialize into the ETHW token. On the other hand, if the hard fork fails, any ETHW (IOU) will be converted into ETH.

How can I get the ETHPOW/ ETHW token?

Whether or not you get the airdrop of the ETHPOW/ETHW token (if any) depends on where your ETH is held at the time of the Merge and fork. If your ETH is held on the Ethereum blockchain, you automatically will get the ETHPOW token if the fork is successful. However, you will not get any airdropped ETHW tokens if your ETH is stored in an exchange that does not support the fork. Therefore, if you want to take advantage of any airdrop, you should consider moving your ETH off of exchanges.

Those who are yield farming or using a DeFi lending platform with ETH may not be eligible to receive any ETHPOW. This is because on a lending platform, your ETH is lent out, so it does not belong to you. You should check with your DeFi protocol on what will happen if there is a fork.

Which exchanges will airdrop ETHW/ETHPOW tokens?

The following exchanges will support any forked tokens and users will receive airdrops if there is an Ethereum fork on a 1:1 ratio: FTX, OKX, Binance, MEXC, Gate.io and KuCoin.

Meanwhile, Coinbase, Kraken and eToro have not made any official announcement on whether they will airdrop forked Ethereum tokens.

For Swissborg users, the forked tokens will be converted into CHSB and airdropped into their wallets. Swissborg users will NOT receive any forked tokens.

For more details, please refer to the announcements from the respective exchanges: FTX, OKX, Binance, MEXC, Gate.io, KuCoin, Coinbase, Kraken, eToro and Swissborg.

Advanced strategies for more free ETHW tokens?

If there is a hard fork, anyone holding ETH will be airdropped the ETHW/ ETHPOW token. Therefore, some people are taking advantage of this by lending ETH from various platforms and holding onto it until after the Merge and potential fork. This is so they can be airdropped more ETHW/ETHPOW tokens in the hopes that they can then sell them for profit.

Tax implications resulting from The Merge or Ethereum hard fork?

In an interview with Cointelegraph, Miles Fuller, Head of Government Solutions at TaxBit, a tax compliance firm stated that this would depend on if there is a hard fork.

If The Merge does not result in a hard fork, then there are no tax implications because no new tokens would be created.

However, there is a hard fork after the Merge, ETH holders would be sent duplicate tokens. This may have tax implications. However, the tax implications will depend on the level of support for the new proof-of-work ETH chain and where the ETH is held when then the fork occurs. If the ETH is held in user-owned wallets, the new proof-of-work ETH tokens would be considered income. And its valuation would be calculated at the time the user comes into possession of the tokens. On the other hand, if the ETH is held in custodial wallets such as cryptocurrency exchanges, the implications would depend on the custodians’ stance on supporting the forked ETH chain. If the custodian does not support the forked Ethereum chain, then users likely won’t receive any new tokens i.e. potential taxable income.

Miles Brooks, CoinLedger’s Director of Strategy also commented that the price of any new proof-of-work token can impact your tax bill. If the tokens’ value decreases substantially after you have received them, you may have a tax bill but possibly not enough assets to settle it. Brooks, therefore, suggests investors find out what they could be eligible to receive. Furthermore, sell some of the tokens upon receipt to ensure that you have sufficient funds for the associated tax bill.

What’s next in the development of Ethereum 2.0?

Phase 0- Beacon Chain is already completed, and development would move onto building Phase 1- The Merge and Phase 2-Shard Chains.

Ethereum 2.0 setup and architecture

Currently, we are in Phase 0 of the road towards Ethereum 2.0. In December 2020, the Beacon Chain was launched and currently exists separately from the Ethereum mainnet we are using today. The merge of the Beacon Chain and the Ethereum mainnet is anticipated to happen in September 2022. The purpose of the Merge is to enable staking features for the entire network and will signal the end of Ethereum mining. This is considered a positive step as Ethereum mining is very energy intensive and unsustainable for the environment.

Vitalik Buterin stated that Ethereum is currently around 40% complete. Once the Merge of the Beacon Chain with the Ethereum mainnet is completed in around September 2022, the Ethereum network will be around 55% complete. Vitalik is confident The Merge is ready to happen soon since, “the only thing left to do is to do a merge on Ropsten [test network].”

After the Merge, Ethereum will have further upgrades which Vitalik calls the “surge”, “purge” and “splurge”. This refers to Ethereum’s scaling, cleanup and evolution.

What is the “surge”, “verge” “purge” and “splurge” in the development of Ethereum 2.0?

After the Merge, Ethereum will undergo further upgrades known as the “surge”, “verge” “purge” and “splurge”.

The “surge” in the development of Ethereum 2.0 refers to adding Ethereum sharding. The purpose of this is the enable more affordable layer-2 bloackchains, reduce the cost of rollups and make it easier for users to operate nodes to secure the network. Once the surge is completed, the Ethereum network is expected to be able to process transactions faster. The Ethereum network today can only process around 12 to 25 tps with an average confirmation time of 6 minutes. Ethereum could process up to 100,000 transactions a second once sharding is completed. This is much faster than traditional payment systems such as Visa which can handle around 1,667 transactions per second.

The “verge” will introduce “stateless clients” and “Verkle trees”- which are a form of mathematical proof. This enables users to become network validators without storing lots of data on their machines. This is a further step in the move towards a Proof-of-Stake consensus model as any validator with staked ETH can confirm and verify transactions. This will be hugely beneficial for decentralization.

The next stage, the “purge” will involve cleaning up old network history. This is to reduce the amount of space required on your hard drive and remove the requirement of nodes to store historical information.

The final stage, the “splurge” would be several smaller upgrades and fine-tuning in order to ensure that the network operates smoothly. Or as Vitalik calls it, “all the other fun stuff”.

What will happen after ETH 2.0 is launched?

Currently, the Ethereum network can only process around 12 to 25 tps with an average confirmation time of 6 minutes. The result is that the Ethereum network is heavily congested with people all vying to process transactions, resulting in high gas fees.

Many “Ethereum killers” have therefore been launched. These are alternatives people can use for processing transactions. Some Ethereum alternatives include SolanaAvalanchePolkadotAlgorand, and Cardano. They a direct competitor to Ethereum as they offer similar features but at lower cost and higher speed.

Eventually, the number of transactions per second will drastically increase to over 100,000 tps. So the question would be, what would happen to the competition i.e. the “Ethereum killers”? Find out more in our article: Ethereum Merge is coming, is this the end of Ethereum killers?

What will happen to Ethereum mining?

Ethereum mining is the process of adding blocks of transactions to the Ethereum blockchain. This is to help secure the Ethereum network through a Proof-of-Work (PoW) mechanism. Miners are then rewarded with ether (ETH) which can be traded on cryptocurrency exchanges. Therefore, many people would run Ethereum miners for profit.

However, the launch of ETH2.0 will fundamentally change the current economics. The existing Proof-of-Work (PoW) consensus mechanism will be replaced by Proof-of-Stake (PoS). The concept of mining will be retired once the Ethereum 2.0 update is fully completed.

For more details check out our article: The end for Ethereum miners after ETH 2.0?

Frequently Asked Questions (FAQ)

Can we transfer ETH2 to the Topaz Testnet?

Currently, transfers of real Ethereum / ETH2 is not enabled for the Beacon Chain Testnet. The testnet is run on Göerli and uses Göerli ETH which you can obtain for free

Can you withdraw ETH2 back to regular ETH?

In Phase 0, ETH2 cannot be withdrawn back to regular ETH. Once converted, ETH2 will only be usable on the Staking Chain until Phase 3

What can I do with my ETH2?

As said, at the moment there is nothing you can do with them, they are just “digital receipts”, and transactions or other features we have now on ETH won’t be available on ETH2 for probably years. There are rumors of a possible secondary market where to trade them though

Can I lose my ETH Deposit in the Node?

Yes. The 32 ETH staked for the validator node is designed as an insurance that the validator node is operational and online at all times. Penalties will be given if the node is offline, and small amounts of ETH will be deducted over time

What is being “Slashed”?

In addition, there are “slashed” penalties for deliberate malicious actions done by the node, such as two conflicting votes

When will Ethereum mining end?

Ethereum mining will not end for quite a few years. Ethereum will retain mining on the main chain until at least 2020. The main ETH1 chain will continue to use mining and run parallel to the ETH2.0 chain. This is to ensure stability during the migration

What is the expected APR for staking ETH?

Here you can have an idea of the APR (in ETH) as it varies with the number of ETH staked (source)

Can something go wrong with the launch of Phase 0?

Everything should proceed quite smoothly, as there have been many tests during the previous phase leading to the launch. Specifically, 2 tests were exclusively dedicated to test the genesis of Beacon Chain

What are the minimum hardware requirements to become a validator?

Following this list on Prysm website to install the client:

Minimum specifications

Operating System: 64-bit Linux, Mac OS X 10.14+, Windows 64-bit
Processor: Intel Core i5–760 or AMD FX-8100 or better
Memory: 8GB RAM
Storage: 20GB available space SSD
Internet: Broadband connection

Recommended specifications

Processor: Intel Core i7–4770 or AMD FX-8310 or better
Memory: 16GB RAM
Storage: 100GB available space SSD
Internet: Broadband connection

Are there projects that will allow me to stake even if I have less than 32 ETH?

If you want to participate in ETH2 staking but you don’t own the minimum amount required to become a validator, or you don’t want to stake an exact multiple of 32 ETH, don’t worry. There will be possibilities through Centralized Exchanges (like Binance and Coinbase) and not only. A big advantage in this case, is to receive liquidity for your staked ETH.
RoocketPool ($RPL), now in beta, will correspond rETH (1:1 with ETH), a tokenized asset that you will be able to trade freely. Lido Finance will do a similar thing through their stETH. LiquidStake will instead let you borrow USDC for your staked ETH collateral. Many other solutions will arise as ETH2 will start its journey; for example, Cream Finance ($CREAM) has recently released an article explaining that user will receive the ETH2P token when joining ETH2 staking through them

Will there be any difference in using the ETH as I am used to?

No, ETH1 will continue as it is with no differences. ETH2 is setting up on a parallel line and the two will merge in the future. The merge will happen without ETH users being able to notice it

What will happen if there won’t be 524,288 ETH (16384 validators) on November the 24th ?

If this threshold isn’t met yet, the event will automatically trigger 7 days after the requirement will be satisfied (whenever it happens). The staking rate is expected to be not linear, as many people will continue to use their ETH to lock in profits, maximizing the opportunity cost offered by Defi for example, until the last moment. The staking rate will probably increase as we get closer to the deadline.

Any news about the penalties?

In a recent tweet Vitalik Buterin has announced that penalties for early months have been reduced of around 25% to 33% compared to the Medalla levels. Additionally, if the threshold will be met, rewards (APR) are now estimated at around 25% (instead of around 14% as previously thought)

How long before being profitable?

With the latest estimation, you should be net profitable in three weeks

Has Vitalik Buterin himself contributed to ETH2 staking?

Yes of course, he is staking himself as we all were expecting him to do. According to CryptoBuzz, Vitalik sent 3200 ETH, worth almost $1,5 million

When is the Merge expected to happen?

The latest prediction is that the Merge is expected to happen in September 2022.

Is testnet ETH worth the same as ETH?

ETH on testnets do not have any monetary value. They essentially allow developers to test and troubleshoot DApps and protocols before going live on the Ethereum mainnet. As a result, there are no markets for testnet ETHs.

Are the testnet merges successful?

Yes, on 11th August 2022, Göerli went live as the third and final testnet merge.

What do the testnet merges mean for the Ethereum merge?

The testnet merge takes Ethereum one step closer to the Merge in September. The three testnet merges, Ropsten, Sepolia, Göerli were largely successful, heightening Ethereum community confidence that the Merge will indeed take place in September.

Will Ethereum gas fees be cheaper after The Merge?

The Merge will not make Ethereum gas fees cheaper. This is because The Merge is only a change in the consensus mechanism from Proof-of-Work to Proof-of-Stake. Only an expansion of the Ethereum network capacity and throughput would lower the gas fees. However, this is still in development.

Will I be able to withdraw my staked ETH after The Merge?

There is currently locked staked ETH (stETH) on the Beacon Chain. stETH is backed 1:1 by Ether (ETH). However, developers have confirmed that users will not be able to withdraw their locked stETH after The Merge. Withdrawal of stETH will instead be possible after the Shanghai Upgrade- the next major upgrade after The Merge. Therefore, users should expect their assets to remain locked and illiquid for at least 6-12 months after The Merge.

Will Ethereum transactions be faster after The Merge?

Ethereum developers believe that transitioning to Proof-of-Stake will result in a 10% increase in block production. However, users are unlikely to be able to notice this slight improvement.

Will Ethereum ETH 2.0 be a new coin?

There will not be a new ETH coin after the launch of Ethereum 2.0. Therefore, existing ETH holders, users of dApps, and traders do not have to do anything in anticipation of Ethereum 2.0. There will not be a hard fork or a migration.

Therefore, users should be wary of websites or services claiming that they will allow users to trade, invest, mine, swap, or stake the ETH2 token. This is because the ETH2 token doesn’t actually exist. However, there are derivative Ethereum tokens used on exchanges that are legitimate. For example, WETH is known as “wrapped ETH” and is the tokenized or packaged form of ETH. WETH is used to pay for items when interacting with Ethereum dApps.

However, a new token, ETHW or ETHPOW may emerge if there is a fork of the Ethereum blockchain.

Will there be any tax implications resulting from The Merge?

If The Merge does not result in a hard fork, then there are no tax implications because no new tokens would be created.

However, if the Merge results in a hard fork, ETH holders would be sent duplicate tokens which may have tax implications. If the ETH is held in user-owned wallets, new proof-of-work ETH tokens would be considered as income, and its valuation calculated at the time the user comes into possession of the tokens. On the other hand, if the ETH is held in custodial wallets such as cryptocurrency exchanges, the implications would depend on the custodians’ stance on supporting the forked ETH chain.

Will dApps or exchanges be affected by Ethereum 2.0?

The launch of Ethereum 2.0 will not cause a huge impact on users’ interactions with blockchain dApps or cryptocurrency exchanges and services.

Will exchanges be shut down during the ETH Merge?

Ethereum developers have confirmed that during the Merge, there would not be any downtime. FTX exchange has announced they will continue trading throughout the Merge.

When was the Ethereum Merge?

On 15th September 2022 at 06:42:42 UTC at block 15537393, the Ethereum Merge was completed.

Will ETH holders be airdropped new tokens after Ethereum 2.0?

There are currently no plans for an airdrop of new tokens for ETH holders after the launch of Ethereum 2.0. So far, Vitalik Buterin and the Ethereum Foundation have expressed that they are firmly against any forked ETH tokens.

Therefore, any websites or social media accounts purporting to airdrop Ethereum tokens are most likely a scam. These scammers will provide a web link where you will be prompted to sign in with your Ethereum wallet and approve a transaction to claim an airdrop. However, what this does is that it gives control of your wallet to the scammer who can then drain your funds.

What is the ETHPOW or ETHW token?

ETHPOW or ETHW is the token that will emerge if there is a fork of the Ethereum blockchain. During the Merge, some community members may disagree (e.g. want to stay with the Proof of Work mechanism) and fork ETH. What they may do, is “copy and paste” the Ethereum blockchain. The result of this is there would be 2 blockchains and 2 tokens. There would be the existing Ethereum blockchain that goes through the Merge with the ETH token. And then there would be the forked chain with a new token called ETHPOW or ETHW.

How can I get the airdropped free ETHPOW/ETHW token if there is a fork?

Whether or not you get the airdrop of the ETHPOW/ETHW token (if any) depends on where your ETH is held at the time of the Merge and fork. If your ETH is held on the Ethereum blockchain, then you do not need to do anything. You will get the ETHPOW token if the fork is successful. However, if your ETH is stored in an exchange that does not support the fork, you will not get any ETHPOW. Therefore, if you want to take advantage of any potential fork and ETHPOW airdrop, you should consider moving your ETH off of exchanges.

There are also difficulties for those who are yield farming with ETH or using ETH on a DeFi lending platform. In those cases, you would not be eligible to receive any ETHPOW. This is because on a lending platform, your ETH is lent out, so it does not belong to you. So you should check with your DeFi protocol for announcements on what will happen if there is a fork.

Which exchanges will airdrop ETHW/ ETHPOW tokens if there is a Ethereum fork?

The following exchanges will support any forked tokens and users will receive airdrops at a 1:1 ratio if there is an Ethereum fork: FTX, OKX, Binance, MEXC, Gate.io and KuCoin.

However, Coinbase, Kraken and eToro have not made any official announcement on whether they will airdrop forked Ethereum tokens.

For Swissborg users, the forked tokens will be converted into CHSB and airdropped into their wallets. Swissborg users will NOT receive any forked tokens.

For more details, please refer to the announcements from the respective exchanges:
FTX, OKX, Binance, MEXC, Gate.io, KuCoin, Coinbase, Kraken, eToro, Swissborg.

Resources:

https://medium.com/prysmatic-labs/how-to-scale-ethereum-sharding-explained-ba2e283b7fce

Ethereum Wallet holders: https://bitinfocharts.com/comparison/activeaddresses-eth.html

The information provided in this article is intended for general guidance and information purposes only. Contents of this article are under no circumstances intended to be considered as investment, business, legal or tax advice. We do not accept any responsibility for individual decisions made based on this article and we strongly encourage you to do your own research before taking any action. Although best efforts are made to ensure that all information provided herein is accurate and up to date, omissions, errors, or mistakes may occur. 
Disclosure: Authors are invested in cryptocurrency projects and have cryptocurrency holdings - including those covered on this website. 

Michael
Michael
I’m Michael Gu, Creator of Boxmining. I’ve been involved in the digital asset and Blockchain space since 2012. Something I immediately noticed was that accurate information is hard to come by in this space. More often than not, we find extremely biased information that exploits the complexity of blockchain to obscure facts. Having been around before bitcoin or blockchain was even “cool” meant that I had to do a lot of discovery myself, and along the way, I had many successes, but also made mistakes. I started Boxmining in 2017 mainly as a passion project, to educate people on digital assets and share my experiences. Being based in Asia, I also found a huge discrepancy between digital asset trends and knowledge gap in the West and China. So I leveraged my knowledge and positioning to bridge that information gap and let people know what is truly happening. This journey has been nothing short of exhilarating for me, starting from when I mined Bitcoin in grad school to appearing on China’s national television as an overseas expert on blockchain technology, and having the honour of interviewing leading crypto entrepreneurs, including Binance CEO Changpeng Zhao and FTX founder Sam Bankman-Fried.

30 COMMENTS

  1. Keep in mind than docker containers don’t have persistence unless you create persistent volumes manually.

  2. I am interested in becoming a ETH 2.0 validator. Does anybody can point me to the right source please?

  3. You say that ETH mining will continue “for quite a few years” and then in the next sentence you say ” Ethereum will retain mining on the main chain until at least 2020″… it is my understanding that ETH mining (PoW) will continue until phase 2 is complete and the chains are finally merger. What say you?

  4. After reading your article, I still don’t know what is a “shard”. Could you please explain what is a “shard” or “sharding”? Thank you. My current definition of “shard” is (Oxford Dictionary): a piece of broken ceramic, metal, glass, or rock, typically having sharp edges.

  5. Hello Michael. Great! Thanks for your time replying so fast. Good job you do, including your very informative YouTube demos. Keep up the good work!

  6. Hi Question,

    Once 2.0 is rolled out and if at that point I decide to stake 32 ETH, can the ASIC machines i had for mining be used as validation nodes?

    Thanks

  7. lol you probably shouldnt be a validator if, not only you dont currently own Ethereum, let alone you dont know how to purchase it or hold it in a crypto wallet.. especially with the harsh punishments for validators who are not on top of their game, you would probably end up loosing all your Eth, or get slashed.

  8. This is a great article Michael, thanks for keeping us so well informed. Im still so frustrated with how un-user friendly the crypto space is. Setting up a node looks bloody complicated. We are a decade + into crypto’s development and things are still so complicated. You cant expect wide adoption when even sending tokens can be fraught with issues (e.g sending to wrong address). I tried setting up a node last year and it took a few days, it was insane.

  9. I hate to see ETH miners pushed out. 2.0 is beyond my ability to comprehend so I will likely sell all the ETH I have in Coinbase for U.S. Dollars when 2.0 goes into full operation. I hate doing this but I feel I will have no choice. I am already looking at other coins to mine.

  10. Can I still be apart of Eutherum 2.0 if I have a bitcoin wallet with 5 Eutherum 8. 6 bitcoin and 18 grand mote to buy Eutherum 2.0 and do you half to just be reliable to be a vaidatior or a programmer only im disabled it would be perfect for me pls thankyou let me know asap Irish750g🍀💯

  11. I bought 7 Ethereum coins a few years back. They have had a nice run up. I don’t know much at all about Ethereum 2.0 but just got an e-mail from Coinbase about it. What do I do? Is Ethereum at some point going to actually merge and become Ethereum 2.0? Or will there be two different Ethereum coins? Coinbase is offering 7.5% APR to upgrade my Ethereum to Ethereum 2.0. Should I do this? Why or why not? If I do nothing, what will happen? What dates are all these things supposed to take place? Thanks for answers.

  12. Sorry, but you confused me with this: “Ethereum mining will not end for quite a few years. Ethereum will retain mining on the main chain until at least 2020”, but this was written in 2020… Was this a typo?

  13. i would like to know the answer for :
    Raphael August 23, 2020 At 2:26 pm
    Hello Michael. Great! Thanks for your time replying so fast. Good job you do, including your very informative YouTube demos. Keep up the good work!
    will eth mining go away in july 2021? did you die of covid or something? u r not answering the question.

  14. If Ethereum mining will not be needed after 2.0, will this affect other mining of other cryptocurrencies? Which ASIC do you currently recommend? Bitmain s19 Pro?

  15. No, being that the 2600 never used diskettes. Also, given your evident ignorance, you would be better off investing in a good school.

  16. Can you explain the total amount of ETL = ETH 2.0 That will be available? Or is it associated with the total of ETHEREUM.

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