 We waited and waited for Ethereum 2.0, and now that the merge is finally upon us, it's hard to contain our excitement. Ethereum 2.0 is going to really shake things up in the world of crypto. ETH2 will be more scalable, more sustainable, more secure, and some are even saying it might outpace fees. Those are some pretty hefty promises. So let's dive in. I'm Jackson Dumont, director of a video at CoinTelegraph. In this video, we'll explain what Ethereum 2.0 exactly is and answer many of the questions that may be lingering in your mind surrounding the merger. If you haven't done so already, please consider leaving a like and clicking that subscribe button. We are the leading media for crypto news coverage and education. Why is the upgrade such a game changer? If you didn't already put two and two together, Ethereum 2.0, or ETH2 for short, is a set up upgrade to the Ethereum blockchain. The new and improved Ethereum 2.0 uses a proof-of-stake protocol to verify transactions in place of legacy proof-of-work algorithm. If you're not a crypto native and you're not familiar with all this lingo, stick around and we'll explain it in more detail later on in the video. But first, let's zoom out and look at the bigger picture, the why of all of this. And to figure out why something as drastic as Ethereum 2.0 is needed in the first place, we need to look at the three Ss, scalability, security, and sustainability. Scalability. Ethereum 1.0 could only handle an average of 13 transactions per second. So when the network is really busy processing transactions, the transactions will compete with another for a slot and the cost per transaction can times skyrocket. Just how much? We've seen fees as high as $70 per transaction. That's like buying God of War Ragnarok every time you want to make a transaction. That's way too much. Ethereum 1.0 is running all these transactions on one single lane. But to reduce network congestion and increase transactions per second, Ethereum 2.0 will split the load of the entire network among 63 other shards. This will lay the groundwork for the so-called surge, which can perform more than 100,000 transactions per second. In comparison, Visa executes something like 1700 transactions per second. Eventually, the shards may even become as fully executable as the Ethereum chain, at which point we'd have our whole blockchain and 63 new blockchains. Now that is an upgrade. Nice. Security. When it comes to decentralized networks, security is always a top priority. These two will make the network resistant to all forms of attacks, including what's known among the crypto community as 51% attacks. That's when malicious users gain control of more than 50% of a blockchain's computing power. The proof-of-stake system makes 51% attacks incredibly difficult. To carry out a successful attack, you'd have to control 51% of the validators, which means you'd have to own 51% of the capital. The transition to proof-of-stake makes Ethereum slightly more secured and decentralized. And just like fine wines or cheese, it'll only get better over time. The more people participate in the network, the more decentralized it will get, and the more secure it will get. Sustainability. Ethereum 1.0's proof-of-work mechanism requires tons of energy to secure the network. Miners increase their odds of success by acquiring increasingly power-hungry mining equipment. This not only increases the Ethereum network's energy consumption, but it also generates hardware waste. In fact, as a result of the legacy proof-of-work protocol, Ethereum has an annual power consumption approximately equal to that of Finland and a carbon footprint similar to Switzerland. But since miners taking their energy resources are no longer needed to secure transactions, Ethereum 2.0 will reduce its carbon footprint by 99.95%. And since proof-of-stake is roughly 2,000 times more efficient than proof-of-work, the energy expenditure will be equal to the cost of running a laptop for each node on the network. That's right. A laptop. Excited? I know I am. Now that we've built up the hype for the upgrade, let's dive into the technical details. How does Ethereum 2.0 work? You see, all this time, the legacy Ethereum mainnet blockchain has been secured by a proof-of-work model. It's the Ethereum blockchain we're used to containing all the things we're familiar with, every transaction, smart contract, in balance since July 2015. But proof-of-work is not just limited to Ethereum. It's a battle-tested approach to building cryptocurrencies and it works a lot like this. Cryptocurrency miners use powerful computers to carry out complex math functions known as hashes. The miners are in a race to see who can solve the functions the fastest and validate transactions. And as they rush to the finish line, the mining process devours an ever-increasing amount of electricity in an attempt to verify each and every Ethereum transaction before they're recorded on a blockchain. But enough about proof-of-work. It's out with the old, in with the new. Proof-of-stake removes the miners from the equation altogether so that instead of machines securing networks, the responsibility falls on, well, responsible users. Here's how it works. Users who want to secure their network must stake at least 32 ETH and become known as validators. An algorithm looks at how much cryptocurrency users have locked up to select which lucky validator gets to add the next block on the blockchain. Essentially, this means that the more the validator stakes, the more likely it is that that particular validator will get to produce blocks. Needless to say, these validators have skin in the game. They're incentivized, like miners are in the proof-of-work model, by the block reward and transaction fees. To prevent validators from getting greedy and attempting to validate fraudulent transactions, the Proof-of-stake system will slash a portion of their state to ease. What does it take to upgrade the entire Ethereum infrastructure? Rome wasn't built in a day, and neither was Ethereum 2.0. 75 years later. Ethereum's developers have been working toward transitioning away from the Proof-of-work model to a Proof-of-stake model for quite some time. The tangible progress was finally made on December 1, 2020 with the launch of the Beacon Chain. The Beacon Chain was created to introduce Proof-of-stake into the Ethereum ecosystem. For over one and a half years, Ethereum has been running not one, but two parallel blockchains simultaneously. One operates using the legacy Proof-of-work protocol in the Ethereum mainnet blockchain as the execution layer, while the new Beacon Chain operates using Proof-of-stake as the consensus layer. In a process you've probably heard of now known as the Merge, the current Proof-of-work algorithm will be merged with the Proof-of-stake system controlled and coordinated by the Beacon Chain. When these two systems finally come together, Proof-of-work will be replaced by Proof-of-stake, merging the entire transactional history of Ethereum. The Merge will be the most significant upgrade in the history of Ethereum, and the ramifications of the Merge will be huge in the world of crypto. No disclosure for any warriors out there. No transaction history will be lost. Your funds are completely safe. You don't even need to do anything. You can just sit back and watch some major crypto tech do its magic. Terms and conditions apply. After the Merge, the next big upgrade on the Ethereum horizon is, brace yourselves, introducing Sharding to the network. Sharding is the process of splitting a database into multiple sets to spread the load. Using out lanes and a highway to lessen traffic, Sharding will reduce congestion on the network by giving Ethereum more capacity to store and access data instead of executing code. Sharding will eventually allow you and I to run Ethereum on our laptops or phones. As it scales up, the more and more people participate in a shared Ethereum, the more decentralized the network becomes and the more secure. And so, only by introducing Sharding into the network can Ethereum 2.0 scale up far enough to achieve what it's set out to do. The truth is, these upgrades were always part of the Ethereum roadmap. Since its inception, Ethereum has forged a path toward increasing scalability while preserving values that are deeply rooted in the space. Values such as decentralization and transparency. But there are so many moving pieces and they are all so very cutting edge. So, only time will tell what Ethereum 2.0 will be able to achieve. If you enjoyed the video, be sure to like it and leave us a comment below. And please, don't forget to subscribe to our channel. The Cointelegraph Cryptopedia is your guide to the chaotic space of blockchain technology and cryptocurrencies.