There are two primary improvements introduced by Ethereum 2.0 that do not exist in Ethereum 1.0: Proof of Stake and Shard Chains.
Proof of Stake
Currently, Ethereum 1.0 runs on a consensus mechanism known as Proof of Work (PoW). PoW relies on physical computing power (miners) and electricity (work) to build blocks on the blockchain. Proof of Stake (PoS) is an upgrade that enables improved security, scalability, and energy efficiency. Instead of relying on physical miners and electricity, PoS relies on validators (virtual miners) and deposits of ether. See “What is Proof of Stake” FAQ for more detail.
Shard chains are a scalability mechanism which drastically improves the throughput of the Ethereum blockchain. Currently, having a single chain made up of consecutive blocks is incredibly secure and makes information easy to verify. However, requiring each full node to process and validate each transaction in consecutive blocks can affect the ability to process transactions quickly – especially in times of high mainnet activity. Shard chains are a mechanism through which the Ethereum blockchain is “split” – thus dividing the data processing responsibility among many nodes. This allows for transactions to be processed in parallel rather than consecutively. Each shard chain is like adding another lane to upgrade Ethereum from a single lane road to a multiple lane highway. More lanes and parallel processing lead to much higher throughput. Shard chains are expected to be rolled out in Phase 1 of Ethereum 2.0.
More information about Proof of Stake & Shard Chains:
- For a less-technical review, see The Roadmap to Serenity and Ethereum 2.0: A Complete Guide
- For a more technical review: see Proof of Stake FAQ, Sharding FAQ, and Vitalik’s Eth2 Landscape