Ethereum 2.0 – What does the release mean for your application?

Maciej Zieliński

18 Jan 2021
Ethereum 2.0 – What does the release mean for your application?

Ethereum 2.0, also known as Serenity is a long-awaited update to the Ethereum network, significantly improving the security and scalability of arguably the world's most popular Blockchain protocol. Above all, it will reduce power consumption and enable the network to process more transactions. The most important improvements from the technical side are to be the transformation of Ethereum into a proof-of-stake blockchain and the introduction of fragmented chains.  

Note, however, that this is a change to the Ethereum infrastructure only. Dapp users or developers and ETH holders can rest assured. Ethereum 2.0 will be fully compatible with the Ethereum 1.0 network they use today. On the other hand, they will also be able to use the ETH they own after the update. 

So why are these changes so important? On the Nextrope blog, we will try to cover everything you should know about Ethereum 2.0. 


Current restrictions

Released in 2015, Ethereum has quickly become the most widely used blockchain protocol (learn what blockchain protocols are and what distinguishes them from each other here). The open public system has enabled previously unseen software applications and generated billions of dollars in value. However, to realize its full potential, Ethereum still has to deal with a few limitations. 

Speed and efficiency:

Currently, Ethereum is capable of handling around 15 transactions per second. Compared to Visa or Mastercard, which are able to process up to 1,500 of them at the same time, it therefore comes off rather poorly. In addition, the process of "mining" ETH, on which verification of these transactions is based, consumes too much energy, which limits the scalability of the entire network. 

What does ETH 'mining' consist of?

Mining is the process of creating a block of transactions to be added to the Ethereum blockchain (hence blockchain). Each block contains transaction information and data such as the Hash - the unique code of the block and the hash of the previous block to which the block hash is compatible. 

Essentially, the miners' role is to process pending transactions in exchange for rewards in the form of ETH, Ethereum's native currency (2 ETH for each block generated, respectively). Generating a block requires the use of a lot of computing power, due to the difficulty level set by the Ethereum protocol. The difficulty level is proportional to the total amount of computing power used to mine Ethereum and serves as a way to protect the network from attacks, as well as to tune the rate at which subsequent blocks are created. This system of using computing power to secure and verify data is known as Proof of Work (PoW).

To maintain the security of the current Ethereum network, therefore, the high energy intensity of the mining process is necessary - making the cost of attacking the network, making any change to any of the already existing blocks, extremely high.

The problem of retaining decentralisation when scaling up 

There are, of course, Blockchain protocols such as Hyperledger Fabric or Quorumthat allow for more transactions per second. However, the higher performance in their case comes from being more centralised than Ethereum. By design, Ethereum is intended to remain a fully decentralised network, so such a solution in this case is not an option. It seems Ethereum 2.0 developers have found a way to improve performance and enable scaling without sacrificing decentralisation. 

What's new in Ethereum 2.0?

Fragmented chains (or chains of fragments) 

At the moment, all nodes in the Ethereum network have to download, read, analyse and store every previous transaction before they process a new one. Not surprisingly, Ethereum is currently unable to process more than the aforementioned 15 transactions per second. 

Ethereum 2.0 introduces fragmented chains, which are parallel blockchains that take over a fair share of the network's processing work. They allow nodes to be dispersed into subsets corresponding to fragments of the network. This ensures that each node does not have to process and store transactions from the entire network, but only those in its subset. 

Proof-of-stake in Ethereum 2.0

In Ethereum 2.0, Proof-of-Work is to be replaced by Proof-of-stake. Network security will be achieved through financial commitments rather than computing power - energy consumption. Proof-of-stake is a consensus process where ETH becomes the validator for Ethereum. The validator runs software that confirms the transaction and adds new blocks to the chain. To become a full validator, 32 ETH will be needed. However, there will be an opportunity to join a pool of smaller validators and thus offer a smaller stake. When processing transactions, validators will take care to maintain consensus over the data and thus the security of the entire network.

Proof-of-stake will drastically reduce the energy intensity of the entire network, which is a key step towards further scaling Ethereum and increasing its environmental friendliness. 

Beacon chain 

A decisive role in introducing proof of stake into Ethereum is played by the Beacon Chain, which, in simple terms, can be described as the layer that coordinates the operation of the entire system. However, unlike the core network (meinnet) present in Ethereum, it does not support accounts or smart contracts. Instead, its main task is to implement proof-of-stake protocol management for all fragmented chains (shards). It was the connection of the Beacon Chain to Ethereum that was the first step towards version 2.0 ( phase 0).

Ethereum 2.0, what will 2021 bring?

The introduction of Ethereum 2.0 developers will divide into 3 stages - phases: Phase 0, 1 and 2. In December 2020, the first one, which started in 2018, was completed. As we mentioned its main goal was to launch the Beacon chain. The success of Phase 0 will allow the start of Phase 1 in 2021 - the shard chain deployment, which will start the full-fledged transition to the Proof-of-stake protocol. The full upgrade to Ethereum 2.0 will be enabled by Phase 2 scheduled for late 2021/early 2022, this is when shard chains should start supporting all contracts and transactions. 

How might the next phases of Ethereum 2.0 implications affect ETH prices? This is a question we will certainly return to in the blog. 


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Token Engineering Process

Kajetan Olas

13 Apr 2024
Token Engineering Process

Token Engineering is an emerging field that addresses the systematic design and engineering of blockchain-based tokens. It applies rigorous mathematical methods from the Complex Systems Engineering discipline to tokenomics design.

In this article, we will walk through the Token Engineering Process and break it down into three key stages. Discovery Phase, Design Phase, and Deployment Phase.

Discovery Phase of Token Engineering Process

The first stage of the token engineering process is the Discovery Phase. It focuses on constructing high-level business plans, defining objectives, and identifying problems to be solved. That phase is also the time when token engineers first define key stakeholders in the project.

Defining the Problem

This may seem counterintuitive. Why would we start with the problem when designing tokenomics? Shouldn’t we start with more down-to-earth matters like token supply? The answer is No. Tokens are a medium for creating and exchanging value within a project’s ecosystem. Since crypto projects draw their value from solving problems that can’t be solved through TradFi mechanisms, their tokenomics should reflect that. 

The industry standard, developed by McKinsey & Co. and adapted to token engineering purposes by Outlier Ventures, is structuring the problem through a logic tree, following MECE.
MECE stands for Mutually Exclusive, Collectively Exhaustive. Mutually Exclusive means that problems in the tree should not overlap. Collectively Exhaustive means that the tree should cover all issues.

In practice, the “Problem” should be replaced by a whole problem statement worksheet. The same will hold for some of the boxes.
A commonly used tool for designing these kinds of diagrams is the Miro whiteboard.

Identifying Stakeholders and Value Flows in Token Engineering

This part is about identifying all relevant actors in the ecosystem and how value flows between them. To illustrate what we mean let’s consider an example of NFT marketplace. In its case, relevant actors might be sellers, buyers, NFT creators, and a marketplace owner. Possible value flow when conducting a transaction might be: buyer gets rid of his tokens, seller gets some of them, marketplace owner gets some of them as fees, and NFT creators get some of them as royalties.

Incentive Mechanisms Canvas

The last part of what we consider to be in the Discovery Phase is filling the Incentive Mechanisms Canvas. After successfully identifying value flows in the previous stage, token engineers search for frictions to desired behaviors and point out the undesired behaviors. For example, friction to activity on an NFT marketplace might be respecting royalty fees by marketplace owners since it reduces value flowing to the seller.


Design Phase of Token Engineering Process

The second stage of the Token Engineering Process is the Design Phase in which you make use of high-level descriptions from the previous step to come up with a specific design of the project. This will include everything that can be usually found in crypto whitepapers (e.g. governance mechanisms, incentive mechanisms, token supply, etc). After finishing the design, token engineers should represent the whole value flow and transactional logic on detailed visual diagrams. These diagrams will be a basis for creating mathematical models in the Deployment Phase. 

Token Engineering Artonomous Design Diagram
Artonomous design diagram, source: Artonomous GitHub

Objective Function

Every crypto project has some objective. The objective can consist of many goals, such as decentralization or token price. The objective function is a mathematical function assigning weights to different factors that influence the main objective in the order of their importance. This function will be a reference for machine learning algorithms in the next steps. They will try to find quantitative parameters (e.g. network fees) that maximize the output of this function.
Modified Metcalfe’s Law can serve as an inspiration during that step. It’s a framework for valuing crypto projects, but we believe that after adjustments it can also be used in this context.

Deployment Phase of Token Engineering Process

The Deployment Phase is final, but also the most demanding step in the process. It involves the implementation of machine learning algorithms that test our assumptions and optimize quantitative parameters. Token Engineering draws from Nassim Taleb’s concept of Antifragility and extensively uses feedback loops to make a system that gains from arising shocks.

Agent-based Modelling 

In agent-based modeling, we describe a set of behaviors and goals displayed by each agent participating in the system (this is why previous steps focused so much on describing stakeholders). Each agent is controlled by an autonomous AI and continuously optimizes his strategy. He learns from his experience and can mimic the behavior of other agents if he finds it effective (Reinforced Learning). This approach allows for mimicking real users, who adapt their strategies with time. An example adaptive agent would be a cryptocurrency trader, who changes his trading strategy in response to experiencing a loss of money.

Monte Carlo Simulations

Token Engineers use the Monte Carlo method to simulate the consequences of various possible interactions while taking into account the probability of their occurrence. By running a large number of simulations it’s possible to stress-test the project in multiple scenarios and identify emergent risks.

Testnet Deployment

If possible, it's highly beneficial for projects to extend the testing phase even further by letting real users use the network. Idea is the same as in agent-based testing - continuous optimization based on provided metrics. Furthermore, in case the project considers airdropping its tokens, giving them to early users is a great strategy. Even though part of the activity will be disingenuine and airdrop-oriented, such strategy still works better than most.

Time Duration

Token engineering process may take from as little as 2 weeks to as much as 5 months. It depends on the project category (Layer 1 protocol will require more time, than a simple DApp), and security requirements. For example, a bank issuing its digital token will have a very low risk tolerance.

Required Skills for Token Engineering

Token engineering is a multidisciplinary field and requires a great amount of specialized knowledge. Key knowledge areas are:

  • Systems Engineering
  • Machine Learning
  • Market Research
  • Capital Markets
  • Current trends in Web3
  • Blockchain Engineering
  • Statistics


The token engineering process consists of 3 steps: Discovery Phase, Design Phase, and Deployment Phase. It’s utilized mostly by established blockchain projects, and financial institutions like the International Monetary Fund. Even though it’s a very resource-consuming process, we believe it’s worth it. Projects that went through scrupulous design and testing before launch are much more likely to receive VC funding and be in the 10% of crypto projects that survive the bear market. Going through that process also has a symbolic meaning - it shows that the project is long-term oriented.

If you're looking to create a robust tokenomics model and go through institutional-grade testing please reach out to Our team is ready to help you with the token engineering process and ensure your project’s resilience in the long term.


What does token engineering process look like?

  • Token engineering process is conducted in a 3-step methodical fashion. This includes Discovery Phase, Design Phase, and Deployment Phase. Each of these stages should be tailored to the specific needs of a project.

Is token engineering meant only for big projects?

  • We recommend that even small projects go through a simplified design and optimization process. This increases community's trust and makes sure that the tokenomics doesn't have any obvious flaws.

How long does the token engineering process take?

  • It depends on the project and may range from 2 weeks to 5 months.

What is Berachain? 🐻 ⛓️ + Proof-of-Liquidity Explained


18 Mar 2024
What is Berachain? 🐻 ⛓️ + Proof-of-Liquidity Explained

Enter Berachain: a high-performance, EVM-compatible blockchain that is set to redefine the landscape of decentralized applications (dApps) and blockchain services. Built on the innovative Proof-of-Liquidity consensus and leveraging the robust Polaris framework alongside the CometBFT consensus engine, Berachain is poised to offer an unprecedented blend of efficiency, security, and user-centric benefits. Let's dive into what makes it a groundbreaking development in the blockchain ecosystem.

What is Berachain?


Berachain is an EVM-compatible Layer 1 (L1) blockchain that stands out through its adoption of the Proof-of-Liquidity (PoL) consensus mechanism. Designed to address the critical challenges faced by decentralized networks. It introduces a cutting-edge approach to blockchain governance and operations.

Key Features

  • High-performance Capabilities. Berachain is engineered for speed and scalability, catering to the growing demand for efficient blockchain solutions.
  • EVM Compatibility. It supports all Ethereum tooling, operations, and smart contract languages, making it a seamless transition for developers and projects from the Ethereum ecosystem.
  • Proof-of-Liquidity.This novel consensus mechanism focuses on building liquidity, decentralizing stake, and aligning the interests of validators and protocol developers.


EVM-Compatible vs EVM-Equivalent


EVM compatibility means a blockchain can interact with Ethereum's ecosystem to some extent. It can interact supporting its smart contracts and tools but not replicating the entire EVM environment.


An EVM-equivalent blockchain, on the other hand, aims to fully replicate Ethereum's environment. It ensures complete compatibility and a smooth transition for developers and users alike.

Berachain's Position

Berachain can be considered an "EVM-equivalent-plus" blockchain. It supports all Ethereum operations, tooling, and additional functionalities that optimize for its unique Proof-of-Liquidity and abstracted use cases.

Berachain Modular First Approach

At the heart of Berachain's development philosophy is the Polaris EVM framework. It's a testament to the blockchain's commitment to modularity and flexibility. This approach allows for the easy separation of the EVM runtime layer, ensuring that Berachain can adapt and evolve without compromising on performance or security.

Proof Of Liquidity Overview

High-Level Model Objectives

  • Systemically Build Liquidity. By enhancing trading efficiency, price stability, and network growth, Berachain aims to foster a thriving ecosystem of decentralized applications.
  • Solve Stake Centralization. The PoL consensus works to distribute stake more evenly across the network, preventing monopolization and ensuring a decentralized, secure blockchain.
  • Align Protocols and Validators. Berachain encourages a symbiotic relationship between validators and the broader protocol ecosystem.

Proof-of-Liquidity vs Proof-of-Stake

Unlike traditional Proof of Stake (PoS), which often leads to stake centralization and reduced liquidity, Proof of Liquidity (PoL) introduces mechanisms to incentivize liquidity provision and ensure a fairer, more decentralized network. Berachain separates the governance token (BGT) from the chain's gas token (BERA) and incentives liquidity through BEX pools. Berachain's PoL aims to overcome the limitations of PoS, fostering a more secure and user-centric blockchain.

Berachain EVM and Modular Approach

Polaris EVM

Polaris EVM is the cornerstone of Berachain's EVM compatibility, offering developers an enhanced environment for smart contract execution that includes stateful precompiles and custom modules. This framework ensures that Berachain not only meets but exceeds the capabilities of the traditional Ethereum Virtual Machine.


The CometBFT consensus engine underpins Berachain's network, providing a secure and efficient mechanism for transaction verification and block production. By leveraging the principles of Byzantine fault tolerance (BFT), CometBFT ensures the integrity and resilience of the Berachain blockchain.


Berachain represents a significant leap forward in blockchain technology, combining the best of Ethereum's ecosystem with innovative consensus mechanisms and a modular development approach. As the blockchain landscape continues to evolve, Berachain stands out as a promising platform for developers, users, and validators alike, offering a scalable, efficient, and inclusive environment for decentralized applications and services.


For those interested in exploring further, a wealth of resources is available, including the Berachain documentation, GitHub repository, and community forums. It offers a compelling vision for the future of blockchain technology, marked by efficiency, security, and community-driven innovation.


How is Berachain different?

  • It integrates Proof-of-Liquidity to address stake centralization and enhance liquidity, setting it apart from other blockchains.

Is Berachain EVM-compatible?

  • Yes, it supports Ethereum's tooling and smart contract languages, facilitating easy migration of dApps.

Can it handle high transaction volumes?

  • Yes, thanks to the Polaris framework and CometBFT consensus engine, it's built for scalability and high throughput.