Ethereum co-founder Joe Lubin: Ethereum 2.0 will be launched in the second quarter of this year

ConsenSys CEO and Ethereum co-founder Joe Lubin believes the next era of Ethereum will arrive in the coming months.

Lubin predicted in an interview in Miami last December that Ethereum 2.0 would launch in the “second quarter or possibly third quarter” of this year. Last week, Lubin stuck to that prediction at the Camp Ethereal crypto event in Wyoming.

"My estimate remains the same," Lubin said. "We have a strong team and are investing a lot of effort in this."

The next step will be to transform the current Ethereum mainnet (which we call Ethereum 1.0) into a ghost network that currently runs in parallel (technically called the Beacon Chain, which will evolve into Ethereum 2.0).

Instead of executing real transactions, the beacon chain now creates a space for validators (computers that verify encrypted transactions) to lock up their hard-earned Ethereum. It lays the foundation for Ethereum to move from the proof-of-work (PoW) mechanism currently used to proof-of-stake (PoS).

Bitcoin also uses the PoW mechanism and has been criticized globally for its huge energy consumption. There are currently no plans to change this.

Under the new mechanism, Ethereum validators are rewarded for ensuring that the network processes transactions correctly. Currently, the reward pays out 5.54% of ETH to stakers, according to data extracted from Staking Rewards.

However, if validators are caught adding fraudulent transactions to the Ethereum blockchain, they can be penalized.

On Tuesday, Ethereum developers announced that the new Ethereum testnet has been successfully merged and transitioned to the proof-of-stake consensus mechanism. The testnet is essentially a cryptographic sandbox where developers can test new upgrades or protocol changes without causing serious damage to the actual blockchain network. Core developer Tim Beiko wrote on Twitter, "It seems to have worked, validators are generating merged blocks, and they contain transactions!"

Once it executes on mainnet, Ethereum 2.0, now renamed the “consensus layer,” will come alive.

What will Ethereum 2.0 bring?

In addition to all the speculation surrounding the exact release date, threads on Crypto Twitter explained and debated what the upgrade would mean for the network and its users.

Ethereum 2.0 will bring several key changes, namely creating an environment where shard chains and rollup technology can theoretically increase transaction speeds and reduce costs.

Ethereum 2.0 will indeed bring lower energy usage and lower gas fees, although many in the crypto community are skeptical about the latter.

Lubin said, “The merger will end proof of work, it will end the carbon footprint of Ethereum, everything will go away. In terms of energy, the cost is orders of magnitude lower. Another exciting fact about moving to proof of stake is that proof of work requires a lot of ETH to be issued in order to incentivize these people who have a lot of infrastructure to lend their resources and verify transactions on the network. So if you have very little infrastructure, then you can issue less ETH in each block that is built.”

After making Ethereum cheaper and greener, Lubin added that the upgrade will also turn Ethereum, the world’s second-largest cryptocurrency, into “super-sound money.”

The move to Ethereum 2.0 will result in a lower emission rate, which means less Ethereum will be provided to validators to secure the network because their operating costs are much lower. For example, running traditional PoW mining equipment comes with huge overhead. Without this overhead, validators will still have an incentive to do their job even if the rewards are cut. In turn, this means that the supply of new ETH entering the market will be reduced.

At the same time, Ethereum’s latest EIP-1559 improvement introduced a destruction mechanism that destroys a certain amount of ETH for each transaction.

These two changes created an environment in which a large amount of ETH was destroyed on the one hand, and less ETH was created on the other hand. Instantly, huge deflationary pressure emerged.

“When the merger happens, we will burn more ETH per day than we issue because there will be less ETH issued to secure the network, and ultra-robust money will emerge,” Lubin said.