How does blockchain process multiple parallel transactions

The 3 biggest changes due to Ethereum 2

Various upgrades have been made since the Ethereum blockchain network launched on July 30, 2015. The next, most significant upgrade to date, Ethereum 2, will trigger three major changes in the network.

Proof-of-stake

Similar to Bitcoin, Ethereum is currently a Proof-of-Work (PoW) blockchain. Thus, the rules - complex arithmetic tasks - for the nodes or "miners" who create the "blocks" (set of transactions) are determined by an algorithm. As soon as a new block appears in the network, the miners do everything in their power to be the first to solve the arithmetic problem and to receive a bonus from the network.

Although PoW has proven itself in supporting blockchain networks for a relatively long time, the concept has one major disadvantage: the high energy costs. PoW is expensive because miners need special computer hardware and often compete to solve the same computing task, consuming a lot of energy.

With Ethereum 2, the network becomes a proof-of-stake (PoS) blockchain. Transactions are confirmed by "validators" who must use their own funds (at least ETH 32) in order to be able to participate in the validation of blocks on the blockchain. The validators are rewarded for successfully confirming blocks, but punished for misconduct or malicious behavior ("slashed"). This economic incentive supports “good behavior” and ensures more security in the system.

The proof-of-stake consumes significantly less energy for operation and usually enables smaller actors to participate in the block validation without having to perform complex arithmetic operations.

Sharding

Ethereum used to exist as a single blockchain. The new structure of Ethereum 2 now consists of a core blockchain, also known as the “beacon chain”, which is connected to various (initially 64) shard chains.

The shards are parallel blockchains that enable transactions to be processed in parallel. The transactions on each shard are checked by validators and their confirmation is forwarded to the beacon chain, thus maintaining consensus across the network.

The beacon chain also randomly assigns validators to the shards. Assigning the validators randomly across different blocks reduces the risk of harmful attacks.

Scalability

Blockchain scalability refers to the network's ability to handle a surge in demand. The transaction throughput is usually used as a measured variable. The Ethereum 2 upgrade increases scalability and expands Ethereum's capabilities in processing transactions and data storage.

While traditional credit card providers like Visa can process at least 1,700 transactions / second, Ethereum currently only processes around 15 transactions / second and even less when the network is congested. With the help of off-chain rollups (encrypted data packets), Ethereum 2 wants to achieve an increase of up to 100,000 transactions / second.

Summary

The Ethereum 2 upgrade brings many advantages for the Ethereum network, such as reducing energy consumption and costs, improving data storage and transaction speed, and generally more security.

The implementation of the Ethereum 2 upgrade is driving the development of the network, which can significantly improve user-friendliness, especially in terms of scalability.

Staking on Ethereum 2

As a proof-of-stake network, Ethereum 2 also gives you the opportunity to secure prizes by staking your token. Bitcoin Suisse offers its customers an all-in-one staking service. More information can be found here.