To answer this question, let’s start with a simple but important fact:

Ethereum 2.0 is not an upgrade to the current Ethereum network. Instead, it is a complete overhaul and redesign of Ethereum.

Many are unaware of this fact, or may even disagree with this characterization. So it is important to clarify.

  1. The new Ethereum 2.0 network shifts away from PoW consensus and uses a completely new and innovative Proof-of-Stake (PoS) consensus mechanism known as Casper.
  2. In PoW chains, a simple way is used to choose how the blockchain progresses and which chain to follow in case of disagreements (forks). PoW blockchains build upon the chain with most accumulated work or, in other words, the chain that has used the most hash rate. As Ethereum 2.0 uses PoS, it introduced a set of fork selection rules, known as LMD GHOST, to identify the right chain to build on.
  3. The current Ethereum network uses a single chain (DAG) of blocks. The Ethereum 2.0 network will use 1024 parallel chains. This is the core of Ethereum’s ambitious plan to improve scalability which is known as sharding. These different chains (shards) can communicate together and all of them will be controlled and validated by a single master chain known as the Beacon Chain. This Beacon Chain resembles the stem of a plant that has 1024 identical branches.
  4. As a result of these radical changes, ETH holders will not be able to simply use their ETH coins on the new Ethereum 2.0 network. Instead, they will have to burn their current ETH and, in return, they will receive the same amount of ETH on the beacon chain. This transfer mechanism is handled by a smart contract on the Ethereum 1.0 chain that is monitored by the beacon chain.

While there are many differences between Ethereum 1.0 and 2.0, the ones discussed are the major points. This exemplifies the amount of work that is needed to deliver Ethereum 2.0.

Why is the Ethereum 2.0 Testnet Launch Important?

As can be seen from the discussed differences, Ethereum 2.0 design has many moving pieces that need to be combined together and tweaked to make the machine work.

Many aspects and concepts of Ethereum 2.0 are completely new and haven’t been tested in any public blockchain before like the Casper consensus mechanism.

Protocols that are trying to achieve similar goals like Cosmos and Polkadot required 2+ years to get to a working design while having the flexibility of starting from scratch. These projects didn’t need to worry about transferring assets like ETH and other ERC-20 tokens form the old chain to the new chain or worry about reducing the impact of changes on dApp developers. The Ethereum community needed to see actual steps in the Ethereum migration process to gain trust in the roadmap execution.

What is Implemented in Ethereum 2.0 Sapphire testnet?

Getting back to the previously mentioned four differences between Ethereum 1.0 and 2.0, the testnet implements #1, #2 and #4 and partially #3. In specific, Sapphire testnet has implemented the Casper PoS consensus mechanism with new fork selection rules, has implemented the maser Beacon Chain, and finally, implemented a mechanism to transfer ETH 1.0 tokens to ETH 2.0 tokens to be used on the testnet. The testnet has not implemented the 1024 shards yet or the mechanism for shards to communicate through (Cross-Shard Communication).

Another notable missing piece of the testnet is the implementation of the Ethereum smart contract functionality, which is scheduled for phase two of the roadmap. Smart contracts require the migration of the Ethereum Virtual Machine (EVM) or the implementation of a suggested alternative (WASM) in the Ethereum 2.0 protocol.

How does Ethereum 2.0 testnet work?

Ethereum 2.0 is a PoS network that has validators who stake tokens to operate and produce blocks for the network. cryptoHence, the first piece of the puzzle is to allocate tokens to the validators so that they can operate.

The Ethereum 2.0 network will eventually use the same valuable ETH tokens we have today, these tokens need to be transferred to the new Ethereum 2.0 network. To test this transfer functionality, Prysmatic Labs devs have used fake Ethereum 1.0 testnet called Goerli, where anyone can get as many fake ETH as they want, and developed a smart contract (called deposit contract) that indefinitely holds any ETH tokens deposited to it.

After the deposit is finished, the Beacon Chain issues the same amount of ETH as ETH 2.0 tokens.


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