Ethereum,  Technology

ETH 2.0 to launch on Dec. 1 as deposit contract milestone reached

The Phase 0 beacon chain of the ambitious upgrade will make its long-delayed debut next week. But it’s going to be a challenging couple of years for Ethereum developers

It’s official: the Ethereum 2.0 begins its launch on Dec. 1.

Ethereum 2.0 is coming (Photo: Pixabay)

The milestone comes after enough ether was deposited into a smart contract to trigger activation of the ETH 2.0 mainnet beacon chain, one week from today.

A minimum of 524,288 ETH (worth $316 million at the time of writing) needed to be staked, locking it up into the contract for the ETH 2.0 upgrade to commence.

Stakers won’t be able to access their crypto for some time, as funds can only be withdrawn when the Ethereum mainnet makes the transition from Proof-of-Work to Proof-of-Stake.

And the beacon chain isn’t even the first step on that road—it’s technically called Phase 0—and it’s best thought of as a base for ETH 2.0. The first words on ethereum.org’s beacon chain webpage read: “The beacon chain doesn’t change anything about the Ethereum we use today.”

What it will do is coordinate the expanded network of shards and stakes, but it has no accounts to send transactions and cannot handle smart contracts.

A slow start

The deposit contract for ETH 2.0 had originally launched on Nov. 4, and it’s fair to say that the campaign had a bit of a slow start.

Ethereum developers were keen for this magic threshold to be released by Nov. 24 to ensure that a soft launch of the beacon chain could happen by Dec. 1.

But as of Nov. 22, Ethereum co-founder Vitalik Buterin tweeted to say that the deposit contract was just halfway to meeting the minimum target—meaning that the vast majority of funds poured in at the 11th hour.

Vitalik Buterin made a point of noting that staking is not closed (Photo: Etherscan)

Etherscan data shows that the value of the deposit contract has continued to grow even further. At the time of writing, the balance stands at 700,224 ETH—with a cash value of $428 million.  

The threshold being met is significant because of how it provides, for the very first time, a clear date about when the first phase of Ethereum 2.0 will commence. The ambitious project has been plagued by delays and technical snafus from the start, with tempers starting to fray as scalability issues led to slow, expensive transactions.

That said, the launch coincided with a big spike in ether’s price, with ETH rising from $465 to $621 in the space of seven days, according to CoinMarketCap.

What’s next?

It’s worth remembering that we won’t see radical changes in how the Ethereum mainnet operates overnight.

In an arrangement that’s best described as renovating your house while continuing to live in it, the next big milestone will be rolling out shard chains—technology that will dramatically improve the number of transactions per second that Ethereum can handle. We’re expecting to see this at some point in 2021… assuming that the project breaks with tradition and finally decides to run on time.

Both blockchains are going to run in parallel until they merge, and it’s expected that this will happen at some point in 2022. As the Ethereum website explains: “Mainnet Ethereum will need to ‘dock’ or ‘merge’ with the beacon chain at some point. This will enable staking for the entire network and signal the end of energy-intensive mining.”

And it’s pretty intensive, with Ethereum soaking up 12.51 TWh of electricity annually—or enough to power the nation of Georgia, according to Digiconomist.

On the face of it, this all sounds frightfully simple… but it’s going to be a journey that’s fraught with risk. The Ethereum blockchain is home to the world’s second-largest cryptocurrency in terms of market cap, and all of these improvements need to be made without disrupting transactions. Unforeseen bumps along the road could be calamitous for the decentralized finance sector, which is largely run on ETH 1.0.

The reaction

Buterin shared some charts that help to break down how many people have contributed to the deposit contract, and how much ETH they locked up.

The vast majority of participants, about 1,400 all in all, deposited 32 ETH. This is worth about $19,200 at the time of writing, and it’s enough to run a single validator node. The number of people who deposited more than this drops off a cliff after that—about 300 contributed enough to run two or three validator nodes, and fewer than 200 stumped up enough crypto to operate four to seven nodes.

Big stakers dominated the ETH 2.0 beacon chain (Photo: Etherscan)

There were a few big spenders though, and one of them was the Celsius network, which put 25,000 ETH into the contract. Billing itself as the savior of the deposit contract hitting the deadline (even though it’s now done this with 175,000 ETH to spare,) Celsius CEO Alex Mashinsky said: “Celsius was launched on Ethereum and scaled on Ethereum, so we thought it would be appropriate to contribute to the launch of ETH 2.0 and place some of the last ETH needed into the pool to make sure it launches on time and on schedule just like we did.”

Making it less about him, Messari founder Ryan Selkis was far more celebratory about what the milestone means for crypto. He tweeted:

“If you don’t celebrate when people accomplish big, audacious goals, you don’t deserve the next bull run. Eth2 is the definition of rebuilding a rocket in midair, so even if you’re a BTC diehard, be happy for the people who just launched the rocket.”

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Connor Sephton is a journalist with an interest in cryptocurrencies, personal finance, and financial inclusion—as well as the challenges the crypto industry faces in achieving mainstream adoption. He owns cryptocurrencies.