Ethereum Eth2 Upgrade

Ethereum (Eth2) Upgrade and What It Means for Software Development?

Estimated read time: 10 minutes

The Ethereum project team is working on a key Ethereum Eth2 upgrade, initially known as ethereum merge.

This Ethereum upgrade involves significant changes, and it will change software development on the Ethereum platform.

What is Ethereum Eth2 Upgrade?

The Ethereum Foundation has published information about the well-publicized Ethereum Eth2 upgrade. This information doesn’t fully match with authoritative media reports on this subject.

We have taken both sets of information into account to explain the Ethereum network upgrade.

The following is a brief account of the planned Eth2 upgrade of the Ethereum network:

A. What is the key driver for the planned Ethereum network upgrade?

Ether (ETH) is the second-most popular cryptocurrency, and the Ethereum blockchain network has played a key role in popularizing blockchain.

The Ethereum project team introduced the EVM (Ethereum Virtual Machine). It’s a runtime environment for apps running on the Ethereum blockchain.

The Ethereum project team has also introduced smart contracts and DApps (Decentralized Applications). All of these enabled developers to create applications with a decentralized business model.

DeFi (Decentralized Finance) applications are examples of them.

The Ethereum blockchain platform is successful, however, it has scalability and performance issues. It uses the “Proof of Work” (POW) consensus algorithm to verify transactions.

This algorithm on consensus mechanism involves solving complex mathematical puzzles.


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This transaction validation process is called “mining”. It requires a lot of computing power to validate ethereum transactions.

“Miners”, i.e., transaction validators need to use GPU cards and other specialized hardware to get that computing power.

The POW algorithm causes network congestion. It increases the Ethereum “gas fees”, which is hard for users.

The POW algorithm increases energy consumption considerably. That has a negative environmental impact.

These factors impact the wider adoption of Ethereum. Furthermore, they make institutional investors wary.

B. The “Proof of Stake” consensus algorithm: The answer to the scalability and transaction throughput issues of the Ethereum network

The Ethereum project team is transitioning to the “Proof of Stake” (PoS) algorithm to resolve the above-mentioned issues.

The PoS algorithm involves people locking in the native token of a blockchain network to become transaction validators. They are called “stakers”, and they naturally have incentives to ensure fair play.

In the case of Ethereum, transaction validators will stake their Ethers. People that stake more Ethers for a longer duration will get more opportunities to validate transactions. They can earn higher staking rewards.

This algorithm offers better scalability and transaction throughput. It doesn’t use much computer power, therefore, Ethereum can cut energy consumption.

Reducing energy consumption will reduce the carbon footprint of Ethereum.

C. Stages of the planned Ethereum 2.0 upgrade

The planned upgrade of the Ethereum blockchain combines several Ethereum upgrades conceptualized in different EIPs (Ethereum Improvement Proposals). The upgrade involves the following stages:

i) Rolling out the “Beacon chain”

The “Beacon chain” is the proof of stake chain offered by the Ethereum Foundation. As the first stage of the Ethereum 2.0 upgrade, the Beacon chain went live in 2020.

The Beacon chain isn’t energy-intensive. It currently runs parallel to the Ethereum mainnet. Interested Ethereum users can stake their Ethers on this environment-friendly chain.

ii) Merging the Ethereum mainnet with the Beacon chain

The second stage of the planned Ethereum upgrade involves merging the current Ethereum mainnet into the Beacon chain. This merge will result in a single chain.

iii) Introducing shard chains

The 3rd stage of the Ethereum upgrade will introduce sharding. Sharding is a well-known concept in the world of database management.

It involves partitioning a database for better scalability. In the case of the Ethereum blockchain network, sharding will partition the entire network into multiple “shards”.

The Ethereum network will need different transaction validators for each shard. That can happen only after implementing the proof of stake consensus algorithm or an algorithm similar to it.

Sharding isn’t possible in a blockchain network that uses the POW algorithm.

Therefore, the Ethereum Foundation can introduce shard chains only after merging the current Ethereum mainnet into the Beacon chain.

iv) Introducing the Ethereum Web Assembly (eWASM)

The 4th stage of the Ethereum upgrade involves replacing EVM with eWASM. EVM provides the runtime environment for smart contracts and DApps running on the Ethereum network.

Ethereum developers need to write smart contracts in Solidity to execute them on EVM. Solidity isn’t as common a programming language as C or C++. Developers sometimes find Solidity hard to understand.

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Also, the Ethereum ecosystem has observed performance issues with EVM.

WebAssembly is a project of the World Wide Web Consortium. It makes web development easier for developers. eWASM is a subset of this project, and it’s expected to offer better performance than EVM.

Ethereum developers can code smart contracts in C and C++ when eWASM is rolled out. The roll-out date for eWASM isn’t clear at the time of writing.

Note: The Ethereum Foundation doesn’t anymore call this upgrade “Eth2”. Earlier, it called the current Ethereum mainnet “Eth1” and the proof of stake chain “Eth2”.

The Ethereum Foundation now calls “Eth1” the “execution layer” and “Eth2” the “consensus layer”. The “Eth2” upgrade is also called “Ethereum Serenity”.

The impact of the planned Ethereum upgrade on software development

The planned upgrade will have the following impacts on Ethereum development:

1. There will be more Ethereum development projects

The energy-intensive POW algorithm provides the best-possible decentralized security to the Ethereum blockchain network. However, it impacts transaction throughput and scalability adversely.

The planned Ethereum upgrade will considerably improve the scalability and performance throughput of Ethereum.

The blockchain-crypto ecosystem will likely welcome this development. More Ethereum blockchain development projects will follow.

2. There will be a higher demand for Ethereum developers

Ethereum developers are already in demand. They have niche skills, and their hourly rates are high. A surge in Ethereum development projects will increase the demand for DApp developers.

Hiring Ethereum developers will become harder. Organizations need to plan for longer hiring lead times and higher budgets.

3. Ethereum developers will need to understand the concepts of sharding after shard chains are introduced

Sharding is a well-established concept in database management. While a few blockchain projects use it already, sharding isn’t highly common in the blockchain space.

Ethereum, the most popular blockchain development platform doesn’t use sharding yet. A large number of blockchain developers work on the Ethereum blockchain platform.

Naturally, they have limited familiarity with sharding.

Sharding involves complex concepts. Effectively managing shards require developers to follow certain best practices.

When the Ethereum Foundation rolls out the shard chains, Ethereum developers need to learn more about sharding.

4. C/C++ developers will enter the Ethereum development landscape after the implementation of eWASM

The implementation of eWASM will bring Ethereum closer to developers with C/C++ skills. That’s a change from the present dependence on a few programming languages.

Presently, Ethereum developers create smart contracts and DApps using the EVM (Ethereum Virtual Machine).

EVM doesn’t support traditional programming languages. It supports Solidity and Vyper, which are for Ethereum development only.

eWASM is a subset of WebAssembly. W3C (World Wide Web Consortium) has created WebAssembly with the objective of making web development simpler. eWASM will open up Ethereum development to C/C++ developers, which is an advantage.

There will be a larger pool of Ethereum developers in the future. C/C++ developers will need to learn about Ethereum development though.

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We can’t yet say when this larger pool of Ethereum developers will be available. That’s because we don’t yet know the roll-out date of eWASM.

5. Ethereum development tools will undergo changes due to the Ethereum upgrade

There is a growing ecosystem of Ethereum development tools. Many of them will undergo considerable changes due to the planned Ethereum upgrade.

Since the planned Eth2 upgrade is in multiple stages, the tools will change in various stages.

The Ethereum upgrade will impact the following Ethereum development tools:

  • MetaMask and other Ethereum wallets used by developers: These might need changes due to the transition to eWASM.
  • The Web3.js Ethereum API: This popular Ethereum API might need changes due to the shift to eWASM. Web3.js might need changes due to the merging of the current Ethereum mainnet into the Beacon chain. It might need changes when shard chains are introduced.
  • The Remix IDE: Ethereum developers use the Remix IDE to code Solidity smart contracts. After the transition to eWASM, developers will be able to code smart contracts using C and C++. The Remix IDE should support these languages.
    • Note: Developers of IDEs supporting traditional programming languages might modify their IDEs to enable Ethereum smart contract development.
  • The Ropsten testnet: Ethereum DApp developers use the Ropsten testnet to test smart contracts. Ropsten and similar testnets will likely undergo significant changes after the current Ethereum mainnet is merged into the Beacon chain. We expect these test networks to be modified after the transition to eWASM too.
  • The Truffle suite of tools: Ethereum blockchain developers use the Truffle suite of tools for testing and deploying smart contracts and DApps. These tools will undergo changes after the merge of the current Ethereum mainnet into the Beacon chain. They will need changes after the eWASM transition too.

Many more Ethereum development tools might need changes after the Ethereum upgrade. Ethereum developers might also be able to use some of the IDEs and code review tools from the traditional software development landscape after the eWASM transition.

6. Ethereum development guides and other documentation will need changes due to the planned upgrade

The Ethereum Foundation offers extensive Ethereum development guides. Many of them will need changes due to the planned network upgrade.

These changes will need to be done in different stages since they need to align with the actual upgrade schedule.

The following documentation might need changes:

  • The overall Ethereum development guides;
  • Ethereum smart contract development guides;
  • Various Ethereum cryptographic token standards like ERC-20, ERC-721, etc.;
  • Guides to scale Ethereum DApps;
  • Ethereum smart contract and DApp testing guides;
  • Smart contract and DApp deployment guides.

Many 3rd party organizations and communities provide extensive documentation and guides for the ethereum community including developers.

Examples are open-source projects that provide Ethereum development tools. They need to modify their documentation.

Hackers routinely target Ethereum smart contracts and try to exploit security vulnerabilities. Experts have created useful lists of Ethereum smart contract vulnerabilities.

New vulnerabilities might arise after the transition to eWASM, and these need to be documented.

7. Ethereum development might become simpler after the transition to eWASM

The transition to eWASM might involve a learning curve for current Ethereum developers. However, eWASM should simplify Ethereum development over the longer term.

This should have the following impacts:

  • Entrepreneurs and developers might undertake more Ethereum development projects. The transition to eWASM should reduce the complexities of Ethereum development. That will lower the entry barrier to undertaking Ethereum development.
  • Project teams will be able to have a judicious mix of senior and mid-level Ethereum developers. Developing using the EVM tends to be complex. Naturally, project teams look for senior Ethereum developers. They might often find it hard to hire senior developers.
  • Ethereum development projects will likely take less time after the eWASM transition.
  • Faster project execution and a more judicious mix of experienced developers will help project teams to cut costs.

Read our blog for more details on blockchain development.

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FAQs on Ethereum Eth2 Upgrade

1. Is the POW consensus algorithm very energy-intensive?

Crypto mining operations using the POW algorithm consume a very high amount of electricity. Take the example of Bitcoin, which uses this algorithm. Bitcoin mining consumes more energy than many countries. Many experts believe that the POW algorithm isn’t sustainable environmentally.

2. Does POW have challenges other than high energy costs, lack of scalability, and low performance?

Apart from the above-mentioned challenges, the POW algorithm is giving rise to the centralization of blockchain mining operations. Crypto mining involving the POW algorithm requires high investments. Large companies are already dominating this landscape, which is undesirable.

3. Will eWASM offer performance advantages over EVM?

Experts observe that eWASM compiles code considerably faster than EVM. This will expedite several processes within the Ethereum network, therefore, eWASM will offer better performance than EVM.


Alexey Semeney

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