The current Ethereum (aka. Eth1) and Eth2 will run in parallel for a while, Eth1 will eventually become a part of Eth2 (Phase 1.5). Ethereum 2.0 is an upgraded version of Eth1. The main objective behind this upgrade is to enable Ethereum to scale while maintaining a high level of security, and decentralization. This is mainly achieve through two changes to the structure and design choices in Eth2 compared to Eth1. The two biggest ones being “Proof-of-Stake” as well as “Sharding”.
Proof-of-Stake (PoS): In a PoS system, validators take the role of miners (known from Eth1). Validators provide computing power, storage, and bandwidth to validate transactions, and they propose new blocks. For doing so, they receive periodic payouts denominated in ETH. Validators need to lock 32 ETH into a deposit contract, which functions as a sort of security deposit, that gets (fully or partially) forfeit in case of malpractice. This way of incentivizing honest behavior requires far less energy than the current Proof-of-Work mechanism, in which miners are incentivized through sunk costs in the form of hardware and electricity.
Sharding: Sharding is the process of splitting up a blockchain into multiple blockchains called shards. It is a way of partitioning the computational and storage workload across different nodes. Hence, the transactional load of the entire network does not have to be processed by each validator, but instead, they can focus on maintaining information related to “their” shard. In order to avoid collusion, the validators are shuffled between shards on a regular basis. In Ethereum 2.0, the shards communicate and coordinate through the Beacon Chain. They are linked through crosslinks, a reference in a beacon block to a shard block. The plan is to have 64 shards that compose the Eth2 network