Huobi Summit Dialogue: Ethereum 2.0, your most concerned issues are clarified at once

Ding Yuan, head of Huobi Pool PoS, revealed that Huobi Pool, as the world's number one Staking pool and one of the top five POW pools in the world, will adhere to its consistent style of considering the security of user assets and will launch ETH2.0 related products and services as soon as possible to facilitate everyone to participate in such a new world.

At 15:00 on July 8, the second phase of Huobi Peak Dialogue - "Waiting for ETH2.0" series AMA activities was launched online. The theme of this issue is "Ethereum 2.0, the truth you should know". Ding Yuan, head of Huobi Mining Pool PoS, had an in-depth dialogue with Johnson, chief analyst of TokenInsight, Esther, head of ECN Ethereum Chinese community, Xu Zhifeng, executive deputy director of Harbin Institute of Technology Blockchain Research Center, and Ma Tianyuan, chief technical researcher of Huobi Research Institute.

The seeds of Ethereum 2.0 were planted many years ago. From concept to research, to testing and implementation, it has been a long journey for the entire ecosystem. As Ethereum 2.0 is getting closer, many eyes are beginning to gather on it. So, in the upgrade of Ethereum 2.0, what do users need to know most?

This issue of Huobi Peak Dialogue focuses on this, and see how senior industry researchers lead you through the fog and get to the core truth of Ethereum 2.0.

The scholars and guests at the conference discussed the following issues:

1. Three major phases of planning for ETH2.0

2. Economic model of ETH2.0

3. Advantages of ETH2.0 VS ETH1.0

4. ETH’s ecological migration

5. Predictions for ETH2.0 and BETH

Part 1: Three major phases of planning for ETH2.0

What is the launch date and main content of Phase 0?

Book of Esther:

First of all, we need to make it clear that the eth2 upgrade is not a one-shot process, but is divided into multiple phases. Currently, we generally discuss the first three phases, namely Phase 0, Phase 1, and Phase 2. More subsequent upgrades are still in open research, including Phase 2.

In general, Ethereum's upcoming network upgrade is called Ethereum 2.0 or eth2, codenamed Serenity, which will be accompanied by disruptive changes such as sharding, proof-of-stake consensus mechanism, and new virtual machines.

The closest to us is Phase 0 of Ethereum 2.0. The main goal of this phase is to launch the beacon chain and transform Ethereum's consensus mechanism from the PoW proof-of-work mechanism to the PoS proof-of-stake mechanism. The beacon chain is not only the starting point of 2.0, but also the core bottom layer of the entire system. It will change the way Ethereum achieves security and data verification.

We first need to understand what a "validator" is in Ethereum 2.0. As the name implies, a validator will play a role in data verification in 2.0, similar to the current PoW miners, responsible for verifying and generating blocks and maintaining the security of the chain. To become a validator in Ethereum 2.0, we first need to stake 32 ETH in the system.

How does the beacon chain change the way Ethereum achieves security and data verification? In terms of security, the penalty of the proof-of-work mechanism is that miners cannot get rewards to cover the cost of work, while the beacon chain will deduct or confiscate the ETH deposit of the validator to a certain extent.

As for data verification, a group of validators will be randomly assigned to each slot (that is, 12 seconds) in the beacon chain to take turns proposing and voting on new blocks. The voting weight of each validator depends on the amount of their deposit. Validators who perform their duties correctly will be rewarded at a certain ratio.

Although Ethereum 2.0 is just around the corner, launching the beacon chain still requires several prerequisites:

1. In the last Ethereum 2.0 AMA held by ECN, developer Afri mentioned that the final public multi-client testnet needs to run stably for at least 2-3 months before the beacon chain is launched.

2. Deploy the eth2 deposit contract on the current main chain so that validators can stake

3. At least 16,384 validators are required to stake to activate the beacon chain

The latest progress of Ethereum 2.0 is: the latest joint test network with main network configuration has started running, the deposit contract has also completed auditing and formal verification, and according to Afri's calculations, Phase 0 will be launched as early as October-November this year.

Phase 1 Technical Map

Esther:

After Phase 0 completes the PoS transition, Phase 1 will begin to deploy the sharding architecture.

Someone asked, what is sharding? Let me extend Vitalik's macro metaphor of sharding.

You can imagine that Ethereum is divided into 64 different islands (64 shards), each of which is experiencing its own story in parallel. Everyone on the island has their own duties, and they can interact with each other and freely enjoy all the functions provided by the island. In addition, there is a main island, which is the beacon chain, which is responsible for regularly and randomly assigning validators to which island to go, and collecting and summarizing the status of each island. The communication between the island and the main island is mainly achieved through "crosslinking".

Although sharding is Ethereum's layer 1 expansion solution, it should be noted that Phase 1 mainly writes data to the shard chain and does not yet have functions such as accounts, assets or smart contracts. In addition, due to the lack of an execution environment for processing transactions, transactions cannot be executed in Phase 1.

Therefore, this stage is more like a trial run of the sharding structure and will not immediately bring about a huge leap in Ethereum’s scalability.

A milestone after Phase 1 is achieved is that we finally have one of the conditions to merge the Eth1 chain with the Eth2 chain, which means that the PoW proof-of-work mechanism will be completely abandoned by then, and Ethereum will become a sharded PoS system consisting entirely of the beacon chain and the shard chain. According to the latest proposal, Eth1 will run as shard 0 of Eth2. However, the specific merger plan still needs to rely on the progress of another R&D branch, namely Stateless Ethereum (Eth 1.x), which I will not expand on here.

What is the ideal plan for Phase 2?

Esther:

Phase 2 is currently the furthest away and may be achieved in 2021-2022.

The theme of Phase 2 is the new virtual machine and execution environment, and the functions of the entire eth2 system are beginning to converge.

The shard chain will not only serve as a "data container", but will actually manage the eWASM virtual machine, support state execution, contract calls, cross-shard operations, etc., and also support the use of different languages ​​to write smart contracts. At the same time, each shard can also choose a different execution environment, such as UTXO-like, Libra-like system, etc.

As for what happens after Phase 2, there is no roadmap for the time being.

Part 2: Economic Model of ETH2.0

The Ethereum network is often criticized for its congestion and high gas consumption. Will the gas model of ETH2.0 be different from the current one?

Johnson:

The current Ethereum network's gas fees are extremely high, and the EIP 1559 proposal in ETH 2.0 can solve the gas fee problem. EIP1559 recommends that Ethereum users pay a basic fee and destroy it through the network and miner fees. EIP 1559's solution to the high gas fees is to completely change the Ethereum network's fee market, thereby changing part of the rules of the game.

EIP 1559 is one of the most important proposals in the ETH ecosystem. The design concept of this proposal is to start from the most basic Gas model and change some rules to achieve the ETH optimized network transfer effect.

The ultimate goal of EIP 1559 is:

1: Better cost prediction

2: Block size can be increased or decreased according to actual situation

3: Safer

4: Improve the economic effect of ETH ecosystem.

EIP 1559 achieves a partial deflationary effect and creates a network effect by destroying the BASEFEE of each transfer. I think the EIP 1559 proposal is a good solution. Although it changes the rules of the game, if it can be successfully implemented, it will have a very positive impact on the ETH ecosystem.

Gas fee estimates will be more accurate, security will be greatly improved, block size will change with actual conditions and Gas fees will be greatly reduced and sustainable.

Currently, EIP 1559 is very promising, but more analysis, research, and community discussion are needed to better implement EIP 1559 and make it work.

5.What is the node reward model of ETH2.0?

Johnson:

The mining of ETH 2.0 belongs to the PoS mechanism, while that of ETH 1.0 is PoW. The different mechanisms lead to completely different methods.

ETH 2.0 uses the PoS mechanism, and each user participating in staking needs to stake 32 ETH to activate staking. This mechanism will be implemented in the Phase 0 Beacon chain, and the community can convert the existing ETH 1.0 into BETH to ETH 2.0 to act as a staking node.

ETH 2.0’s PoS mechanism also has a slashing mechanism, which occurs when a node exhibits malicious behavior. Participants can also choose to Over-stake and deposit an extra 32 ETH into the node.

The beacon chain of ETH 2.0 has just started phase 0. I expect that the node reward model of ETH 2.0 and the popularity of the industry will have a positive effect on the short-term price of ETH in the short term. In the long run, the value of ETH2.0 will not be fully realized until phase 3.0 is fully implemented. The beacon chain is just the beginning of ETH2.0.

During the transition to ETH 2.0, ETH 1.0 will still exist, but the current mechanism of ETH 2.0 encourages everyone to switch to the ETH 2.0 staking model.

In Phase 0, the transfer from ETH 1.0 to ETH 2.0 is one-way and cannot be transferred back to ETH 1.0 for the time being.

6.Has the overall inflation rate changed compared to the current ETH1?

Johnson:

As I just said, in the process of transformation to ETH 2.0, ETH 1.0 and ETH 2.0 chains will coexist. So the inflation rate is what everyone is concerned about.

The inflation mechanism of ETH 2.0 phase 0 will change based on the number of validators. The entire inflation is based on the highest inflation rate proposed by Vitalik, which is also much lower than the current inflation rate of ETH 1.0 PoW network, which is 4%.

In the ETH 2.0 phase 0 stage, ETH 1.0 will still exist and run together with the ETH 2.0 chain. And ETH 1.0 PoW miners can still get the stipulated block rewards. When ETH 1.0 and 2.0 coexist, the overall inflation will increase. However, it can be seen from the above figure that although the overall inflation of ETH1.0+2.0 has increased, it has not increased too much. And if the EIP 1559 proposal can be successfully implemented, it will lead to the destruction of some transfer fees, so the overall inflation level does not have much impact on the ETH ecosystem.

Although the inflation rate during the period of coexistence of ETH 2.0 and ETH 1.0 has increased to a certain extent, it has not increased too much. I believe that the slightly higher inflation rate during the period of coexistence of ETH 2.0 and ETH 1.0 is a sacrifice made for the full implementation of ETH 2.0 in the future, sacrificing short-term interests to create a better future for ETH 2.0.

Part 3: Advantages of ETH2.0 VS ETH1.0

7-9: Please give us an overall introduction to the advantages of ETH2.0 compared to ETH1.0

Xu Zhifeng:

As the pioneer of blockchain smart contracts, ETH1.0 has opened a new era of blockchain, but it has also encountered some shortcomings. The biggest goal of ETH2.0 is to get rid of the limitation of low TPS of ETH1.0, including the transformation of consensus mechanism from PoW to PoS, and the application of sharding technology on ETH. We mainly talk about the advantages of ETH2.0 VS ETH1.0 from three aspects.

The first aspect: scalability

The biggest problem with Ethereum 1.0 has always been its lack of scalability, and it still suffers from congestion and blockages at peak usage. The main motivation for Ethereum to launch the ETH 2.0 version is scalability.

The scalability of blockchain systems is limited by factors such as data and consensus. To improve scalability from the data perspective, 2.0 uses an "off-chain" or "layer 2" expansion solution, the main purpose of which is to expand performance while retaining the decentralized advantages of distributed protocols.

Layer 2 platforms and protocols process data in a way that reduces the burden on the main chain, thereby enhancing the scalability of the entire blockchain network by transferring part of the main chain's data processing to Layer 2.

Another way is to improve scalability from the perspective of consensus. The POW consensus mechanism may have advantages in decentralization, but its energy consumption and performance are far behind the POS consensus mechanism.

ETH2.0 will use sharding technology to parallelize the processing of scalability bottlenecks. It is predicted that after ETH2.0 is fully implemented, the performance will be greatly improved, the transaction confirmation time will be greatly shortened, from several minutes to a few seconds, and the scalability will also be greatly improved.

It is estimated that the TPS of ETH2.0 will reach tens of thousands or more.

The second aspect: security

Ethereum 2.0 combines the low security of each partition with the high security of the main chain.

The normal operation of the Proof of Stake consensus protocol leads to the generation of finality attributes on the data, the rotation system of the committee, and the participants reach a consensus during the participation process. Once the finality of this data is reached, the data cannot be changed unless more than 1/3 of the staked tokens are destroyed. These tokens are stored in the system by the participants.

This property adds some nice security guarantees that current PoW systems lack.

The third aspect is the development threshold

In ETH1.0, the development and execution environment for Ethereum developers mainly uses Solidity or Vyper, which are compiled into more general low-level operations that can be understood by the Ethereum Virtual Machine (EVM). Every DApp on Eth1.0 needs to be designed with EVM in mind, and the limitations of the Ethereum 1.0 state transition function (EVM) make the entire system a bottleneck.

eWASM will replace EVM as the state execution engine of the Ethereum 2.0 network. eWASM is the Ethereum version of WASM (WebAssembly) code, which was created by the World Wide Web Consortium (W3C), a developer team responsible for maintaining and standardizing the Web.

eWASM will greatly improve speed and efficiency, reduce or even eliminate precompilation and interoperability. eWASM will support additional languages ​​including C, C++ and Rust that allow Ethereum developers to use more, and will benefit from a wider toolset than EVM. It can provide an executable binary format, an architecture very similar to traditional computers, high efficiency and support for multiple programming languages ​​and developer tools, and backward compatibility with EVM.

In the ETH2.0 Execution Environment (EE), any type of state transition (using WASM) can be built directly into the protocol. With EE, the bottleneck of ETH1.0 will no longer exist, allowing the construction of new DApp types that can take full advantage of open protocols.

Part 4: ETH Ecological Migration

10. How and when will the contracts and tokens on ETH1 be migrated?

Ma Tianyuan:

This is an interesting question. The Ethereum community has a discussion thread about the migration from ETH1 to ETH2.

In this discussion post, Vitalik has put forward a "TLDR" statement, which I think is very much like an "overall guiding principle": that is, the four words "user experience".

My understanding is: for those users who are not particularly concerned about Staking or ETH2.0 upgrades, they do not need to check any information or care about anything. Even if they just lie down every day, their smart contracts and tokens will automatically complete the migration from ETH1.0 to ETH2.0.

This time may be after ETH1.5 or ETH2.0 is completed. Now it seems that ETH1.5 is more likely. The specific time may be someday in the second half of 2021.

Regarding Phase 1.5, according to the Ethereum Foundation’s vision in early June, in Phase 1.5, ETH1 will be integrated into a shard (perhaps a bridge will be built). Users’ tokens can be passively migrated after Phase 1.5.

However, for users who like to tinker, if they want to try Staking, they can actively burn ETH and migrate it to ETH2.0 after the Phase 0 beacon chain goes online (estimated to be Q3 or Q4 this year), turning it into BETH, and then participate in Staking mining.

However, it should be noted that BETH may not be transferred to other accounts or transferred back to ETH1.0 within two years.

If you don’t want to try, as I just said, you can wait for 2-3 years for ETH1.0 to be incorporated into ETH2.0 and realize the passive migration of ETH. This process should be completed automatically. For ERC-20 Token, the process is similar. The development team can wait until the completion of Phase 2 of ETH2.0 and then complete the active migration through manual mapping, or wait for ETH1.0 to be incorporated into the ETH2.0 framework to realize passive migration.

For users, the only thing to pay attention to is that when ETH1 and ETH2 merge, ETH1 may be suspended for 1 hour.

For developers, there is also a small change in GAS. The gas fees of some IO-accessing opcodes may increase. Some teams doing DeFi and DApp need to reserve sufficient Gas fees.

11. Way out for existing ETH miners

Ma Tianyuan:

ETH1.0 will continue to exist for at least 3-5 years, as mentioned in the article The 1.x Files: a fast-sync on the official Ethereum blog. So current miners can continue to mine for a long time, but they have to think twice before purchasing new mining machines.

In addition, the difficulty bomb has been postponed several times. The important task of the previous hard forks was to postpone the difficulty bomb. In fact, from what I have seen, the Ethereum community is very cautious and is very worried about community resistance. So I estimate that the difficulty bomb may be postponed several more times.

Once the two chains merge, the difficulty bomb will cause the difficulty of the Ethereum network to soar. For miners, Asic mining machines can mine blockchains such as ETC that also use the Ethash algorithm, while graphics card mining machines can mine other graphics cards to mine tokens. There are many graphics cards that support it, so I won’t name them one by one. If it doesn’t work, you can also sell it as a mining card at a discount on Xianyu, which can also benefit some gamers who want to buy high-end graphics cards at a low price.

In addition, miners who believe in Ethereum can start to accumulate some ETH from now on, and once they have accumulated 32 ETH, they can participate in PoS mining. In addition, Huobi Mining Pool, for example, should have prepared very user-friendly PoS mining related tools and products this time, so there is no need to worry about the difficulty of switching from PoW mining to PoS mining.

12. Where will the old ETH1 chain go?

Ma Tianyuan:

We correct a common misunderstanding. The ETH2.0 upgrade is not a simple hard fork upgrade. In previous hard fork upgrades of ETH, the old chain stopped and the new chain started. However, in ETH2.0, the old chain, the PoW chain, will coexist with the PoS chain for at least 3-5 years.

Therefore, during the coexistence of the two chains, there will be a new native token on ETH2.0 called "BETH", which will be migrated from the ETH on the PoW chain after it is destroyed. This migration process is gradual, community-initiated, and irreversible. The old ETH chain will not be stopped directly by the "difficulty bomb", but will exist for 3-5 years, and may be transformed into a shard chain under the ETH2.0 framework and exist for a long time.

The fate of ETH1 has not yet been determined. Currently, there are two popular views. The first is that after ETH1 is merged into ETH2, it may serve as a special "shard chain". After 1-2 years, the difficulty bomb will significantly increase the difficulty of mining, and eventually ETH1 will enter the "Ice Age" and it will no longer be possible to mine. Everyone will go directly to the ETH2.0 ecosystem. This is the most widely held opinion.

The second is that ETH1 will exist for a long time, but the rewards will be less and less, and the difficulty bomb may be removed. This plan is mainly considered from the perspective of community resistance.

I personally prefer ending 1.

However, this is just a "concept" from today's perspective. Perhaps a more appropriate and multi-faceted ETH1 plan can be devised later.

13. Is there a strong risk of forking in the community?

Ma Tianyuan:

Conclusion first: (most likely) no.

The ETH2.0 upgrade is different from previous blockchain upgrades. It starts from scratch to build a new blockchain. The main chain will still exist for a long time, and users will gradually migrate on their own. The related development of ETH1.0, such as blockchain pruning and state channel development, will continue to advance.

If holders want to get Staking benefits and developers want to use Ethereum with better performance, they can migrate to ETH2.0 on their own. If miners and fundamentalists are more optimistic about PoW, then these people can continue to stay on the old Ethereum chain.

The whole process is relatively free, so community resistance is not the main contradiction. In addition, with Vitalik personally in charge, the possibility of community splits leading to strong hard forks is low.

Of course, if ETH1.0 is merged into the ETH2.0 framework in the future, it is reasonable for ETH1.0 to use hard forks to complete several patch upgrades similar to Constantinople and Muir Glacier. However, such soft fork upgrades are unlikely to cause community forks and splits.

Part 5: Predictions for ETH2.0 and BETH

, you can start exchanging BETH in Phase 0. Is there any liquidity solution for BETH in the short term? What should I do if I regret it after the exchange?

Ma Tianyuan:

This problem cannot be solved by the design of ETH2.0 itself at present.

The essence may be that we need a third-party organization that can convince the public. Because from the chain point of view, BETH cannot be transferred back. ETH will first be burned (Burn) on ETH1 through the contract, which is actually what we usually call destruction, and at the same time a new BETH will be generated for you on ETH2.0.

Since the ETH on ETH1.0 has been destroyed, there is no way to solve this problem on the chain. In fact, a third-party organization is needed here to provide users with risk protection and even exit plans, so that users can confidently support ETH2.0 in Phase 0.

What are the potential opportunities for BETH? Will the value of BETH be lower than ETH in the initial stage?

Johnson:

I just happened to be studying the value of BETH and ETH 1.0 the past two days.

In the short term, ETH 2.0 encourages everyone to switch to PoS, so a unilateral conversion is proposed. After switching from ETH 1.0 via BETH to ETH 2.0 phase 0 Beacon chain, it is temporarily impossible to switch back.

This is a practice to encourage the community to adopt ETH 2.0. In the short term, ETH 2.0 coins may be listed on a limited number of exchanges, resulting in a lack of liquidity.

In the long run, if ETH 2.0 runs stably and has a lot of community support, exchanges will definitely list ETH 2.0, but the coexistence of ETH 1.0 and ETH 2.0 will lead to a very interesting phenomenon, such as how to price ETH 1.0 and ETH 2.0. I think there will definitely be a price difference between ETH 1.0 and ETH 2.0, but it is hard to say how much this price difference is.

The emergence of price differences is reflected in many aspects, such as market risk, the difference in ETH 1.0/2.0 mainnet risk, liquidity, community, etc. These risks will be reflected in the price difference, but how much the difference is still to be tested by the market.

The Muir Glacier Patch was designed to delay the occurrence of the ice age, but it increased miners' income in the short term and led to inflation. If EIP 1559 fails to reach a consensus and does not actually burn the expected ETH, will it also cause similar inflation problems?

Esther:

Although EIP 1559 has been hotly discussed recently, its implementation may still be a long way off.

There is also a solution called Escalator, one of the considerations is to provide a diversified fee market alternative, and before Ethereum 2.0 achieves full functionality (that is, transaction volume increases significantly and more transaction fees are burned), the impact of EIP 1559 may not exceed our expectations.

After Phase 2, the inflation rate will drop significantly. The data we have seen before shows that under ideal conditions, it will be maintained between -0.5% and 0.5%.

To be precise, it is the inflation rate after the merger of Eth1 and Eth2 + EIP 1559 and similar plans.

It is worth noting that in the free question and answer session, Ding Yuan, the head of Huobi Pool PoS, also responded to the question of "whether Huobi will help users participate in ETH2.0". He said that Huobi Pool, as the world's number one Staking pool and the top five POW pools in the world, will adhere to its consistent style of considering the security of user assets and will launch ETH2.0 related products and services as soon as possible to facilitate everyone to participate in such a new world.

About "Huobi Peak Dialogue"

Huobi is the latest online community sharing column launched by the official website of Huobi. As a leading enterprise with great influence in the industry, Huobi not only actively participates in ETH2.0 research, but also takes the initiative to assume due responsibility for industry evangelism. Huobi will work with global partners to have dialogues with top experts, senior experts, and community KOLs in the blockchain industry to interpret the significant impact of hot events on the industry, share insights, and output the most authoritative cutting-edge insights for the industry.

At present, in order to deeply witness and participate in the arrival of the historic moment of ETH2.0, Huobi's "Waiting FOR ETH2.0" series of special events are ongoing. Relying on its high-quality brand image and deep industry resources, Huobi is building a professional, open and credible ETH community exchange platform, inviting industry leaders to discuss the present and future of ETH, breaking through the closed status of Ethereum communities at home and abroad, strengthening international technical exchanges, and showing the cutting-edge thinking and strength of Chinese and foreign blockchain practitioners.