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ETH to ETH2: the same asset, evolved

BY Benjamin Whitby ON Dec 05, 2019

Morpho didius – museum specimen. Credit: Wikipedia

Figure 1: Morpho didius – museum specimen. Credit: Wikipedia

Over the years the crypto community has evolved from hobbyist type activity to the global phenomenon it is today.

We believe, as many of you do, that every financial product will be tokenized and assets that have never previously had liquidity be enabled by the crypto superpowers to become tokenized assets.

Much of the progress has been made on closed DLTs, which is the equivalent of the corporate intranets of the late 90’s. The public open internet made a much greater impact to the world than these closed systems.

So open is better, but the majority of open chains today operate on inefficient proof of work consensus that is highly wasteful of resources. Ethereum has a commitment to move to proof of stake and there are currently seven teams working on implementing Ethereum 2 nodes in the best way to make this happen.

In order to move to proof of stake, Ethereum needs to evolve. The process of evolution involves moving to a new blockchain that is managed via staking and validators rather than proof of work. To do this, a token called ETH2 is discussed, this token will be the token that is used to enable the validation nodes.

The question that has many scared is that in some regions a crytpo-to-crypto exchange is seen as a capital event, where gains must be realized and tax paid on any said gains. If that logic is applied to the ETH to ETH2 transition we could see a huge barrier to innovation.

Thankfully there are many ways that we can demonstrate that the ETH to ETH2 position is not a change or an exchange of token, but a movement of the same token from the inefficient proof of work Ethereum 1 network to the future proof of stake Ethereum 2 network. There are teams working on how this transition could be made in a way that all agree there is no risk of a nasty letter from the tax man.

Two-way Ethereum and Ethereum 2 bridge.  Credit Vitalik Buterin

Figure 2: Two-way Ethereum and Ethereum 2 bridge. Credit Vitalik Buterin

We are working with the community, regulators and governments to help educate them on why this is needed and why the innovation should be championed. Gone are the tech first movements that we enjoyed in the early days: now we move openly, with consideration and are consciously transparent. Unfortunately, there may be a few jurisdictions that don’t recognise the importance of innovation and the move to proof of stake, but we hope they are few, as they would effectively be hampering their citizens from exploring the evolving world of tokenization, and potentially putting their country on the back foot for the emerging Web3.0 infrastructure.

The good, no amazing, news is that the authorities are open to discussions and supportive of technological advancement. We have seen what happens when centralized positions are abused and ETH2 and Web3.0 are great tools to help society move away from centralized entities.

Ethereum running on proof of stake, enabling the Web3.0 infrastructure will enable growth in the world. It’s not about unicorns and moon lambos, it’s about running the mechanics for maintaining consensus without the huge waste of energy and silicon that proof of work consumes every year.

So in short, tokens on ETH and ETH2 are the same asset, Ether, but running on different networks.

If you are interested in staking with our platform or interested in speaking with the regulators and authorities that are considering the implications of staking please write to us at info@attestant.io and we can take things from there.

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