Ethereum 2.0 and Its Impact on Blockchain Industry – Tech Guide


Once closely affiliated (and even confused) with Bitcoin, blockchain gained a wider range of applications with the introduction of Ethereum – a platform that leverages smart contracts and enables the development of self-executed, decentralized, and immutable Turing-complete apps. 

Ethereum helped leverage the power of blockchain and increased its rate of adoption to healthcare, education, finance, tech, gaming, and other fields. Now that the network is step-by-step rolling out its Ethereum 2.0 network update, the community is bracing itself for the impact the full launch will have on blockchain.

In this post, we will take a look at the concerns Ethereum developers have regarding the current state of the networks, how the network update solves these challenges, and the aftermath of the Ethereum 2.0 release.

What Are The Key Issues With Ethereum’s Current State?

Aside from the rollout of the beacon chain, at the time of writing (June 2021) the network has the same infrastructure it’s been relying on for years. The architecture behind Ethereum is efficient enough to support over 3,000 dApps – however, it is by no means perfect.

To understand why the development team has been advocating for the changes known as ETH 2.0 since the early days of the platform, let’s take a look at the key challenges stalling the growth of Ethereum as we know it.


Since smart contract developers aim to build long-lived solutions, they understand the need to add new features to decentralized apps, improve their performance, and ensure relevance over time.

At the moment, Ethereum meets these needs to a limited extent. Scalability issues connected to Solidity (the programming language used for Ethereum development), lack of concurrency, and the flawed gas system confine smart contract applications at a small scale.

  • Solidity. The key concerns developers have with Solidity are its oversimplified syntax and lacking support of useful features like exception handling, the lack of libraries and APIs, as well as the challenges related to memory and storage management.
  • Limitations of the EVM. For one, Ethereum relies on a simplistic key-value database that doesn’t let developers build highly efficient applications. Secondly, the environment doesn’t support multi-threading, limiting the scalability of dApps that rely on it. Thirdly, the stack is limited to 1024 items, each of which has a 256-bit size – the constraint gets in the way of designing complex apps.
  • No concurrency. Ethereum 1.0 doesn’t support parallel transactions, meaning that, for each transaction, all running nodes need to process the entire transaction history. Hence, the network throughput is too low to support widespread adoption, averaging 15 TPS.


Operating in an unpredictable environment is a major concern for smart contract developers. While some of these concerns (like peer-to-peer transaction verification) are inherent to blockchain networks, others are specific to system design choices Ethereum 1.0 is bound by.

Here are the key security concerns of Ethereum developers:

  • Risk of 51% attacks. Until recently, Ethereum relied on proof-of-work as its consensus algorithm, meaning that users needed computing power to “mine” blocks. Under these circumstances, to overpower the network, an individual or a group needs to amass over 51% of the total power on the network. At the moment, no one was able to overtake Ethereum – however, studies report a centralization trend for PoW blockchains which increases the likelihood of 51% attacks.
  • Selfish mining – a vulnerability that can be exploited if a miner holds over 25% of the total computing power. By mining blocks and not broadcasting them to the network, selfish miners grow private chains that will over time grow longer than the main chain. Once this happens, a miner will broadcast the blocks to the network and the rest of the community will have to accept a private branch as the longest one, resulting in higher profits for misbehaving miners and risks of bugs or contract errors for honest miners.

These are a few of the most impactful concerns that keep developers from releasing dApps on Ethereum and encourage the development team to improve the network.

Let’s take a look at the steps the ETH 2.0 update takes to mitigate these challenges.

What Exactly Will ETH2 Bring to Ethereum?

Ethereum 2.0 (also known as Serenity) is the final stage of the network development roadmap. It’s the most ambitious network update yet, meaning to improve nearly all aspects of the platform.

Here’s the rundown on the key components of the new Ethereum and their impact on blockchain.

PoS replaces PoW: Sustainability 

One of the key issues opinion leaders frequently express about the Nakamoto consensus or Proof of Work is that it’s wasteful by design. Since the amount of computational power is used to ensure network security, there aren’t many ways to reduce energy consumption tied to Proof of Work (and it equals the amount of electricity needed to sustain Switzerland).

On the contrary, PoS is much more sustainable since computing power is not proof of legitimacy and a measure of security.

Sharding and rollups: Scalability

Sharding: fragmenting the main blockchain 

To address scalability concerns (one of the key challenges of the current network), the development team turned to sharding – a scaling solution that splits the burden of validation between the network users.

In the new version of Ethereum, validators will not have to process the entire blockchain. Instead, nodes will be able to verify transactions by processing a designated number of blocks – a shard chain.

64 sharded chains are connected to the main network and the community ensures that each committee is playing by the rules by verifying smart contract signatures coming from each fragmented chain.

The key benefit of sharding is allowing parallel transactions and improving throughput from 15 to thousands of transactions per second.

Rollups: addressing network congestion challenges

Rollups are another technical solution the Ethereum team is relying on to solve the scalability trilemma. The network as we know it right now struggles with congestion since all processes are dealt with on the main chain.

Rollups are a way to reduce network congestion by moving most activity off the chain using a so-called “Layer 2” protocol. To ensure the legitimacy of transactions outside the mainnet, the blockchain will verify and approve off-chain smart contracts.

Since verifying smart contracts is less resource-demanding than processing payments and withdrawals, the network will use computational power more efficiently and increase transaction capacity.

eWASM: Wider range of development tools

In the final stage of the Serenity update (scheduled for release in 2022), the EVM will be replaced by eWASM (short for Ethereum Web Assembly). The new virtual machine will share key functions with today’s EVM.

However, unlike EVM, eWASM will extend the range of supported programming languages beyond Solidity, allowing developers to deploy dApps in technologies they use for standard projects.

Through the release of eWASM, the Ethereum team addresses scalability issues connected to the simplicity of Solidity and will expand the range of tools developers can integrate into dApps development.

Will The New Blockchain Increase Ether Prices?

The opinions on the value of ether after the network update is out are split. Some theorize that, after ETH 2.0, prices will rally. For one, that has to do with the fact that, until the launch of the update, over 520,000 ETH will be out of circulation and locked in the beacon chain.

Thus, after the release, the value of 1 ETH will rise.

Others are concerned that the reduction of ETH liquid supply will reduce coin velocity (the rate of cryptocurrency exchange among different parties). According to fiat-centered economic studies, reduced coin velocity affects the value of currencies negatively – while it’s not clear to which extent this correlation applies to crypto, it’s worth taking into consideration.

Finally, the increase of Ether prices rests on the success of the update. If the release goes smoothly and with few bugs, ETH 2.0 will gain traction among investors and have higher adoption rates among developers (for obvious reasons like improved usability, scalability, and resource efficiency). On the other hand, if the release doesn’t make a convincing case for PoS efficiency, ether prices are at risk of dwindling.


The Ethereum network update is a risky but potentially rewarding commitment on the behalf of the development team. Through a range of impactful shifts, the platform founders will ideally be able to solve scalability, usability, and security issues that hold the platform back from realizing its full potential.

As for Ethereum users, they can benefit from supporting the network in its early days. Staking ETH 2.0 as an early validator increases the node’s selection odds in PoS and subjects users to higher interest rewards.

On Redot, you can stake Ethereum 2.0 in just a few clicks with no fees. Find out how staking works or create an account to get started!

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About the Author: Kate