"Ethereum 2.0 refers to a set of interconnected upgrades that will make Ethereum more scalable, more secure, and more sustainable. These upgrades are being built by multiple teams from across the Ethereum ecosystem."

(Main source: Ethereum)

The Ethereum protocol that launched in 2015 has had incredible success. But the Ethereum community always expected that a few key upgrades would be necessary to unlock Ethereum's full potential. High demand is driving up transaction fees that make Ethereum expensive for the average user. The disk space needed to run an Ethereum client is growing at a fast rate. And the underlying proof-of-work consensus algorithm that keeps Ethereum secure and decentralized has a big environmental impact.

What is commonly referred to as Eth2 is a set of upgrades that address these problems and more, the transition from proof-of-work to proof-of-stake and scale up hundreds of times the number of transactions per second. This set of upgrades was originally called 'Serenity', and they have been an active area of research and development since 2014.
Now that the technology is ready, these upgrades will re-architect Ethereum to make it more scalable, secure, and sustainable – to make life better for existing users and entice new ones. All while preserving Ethereum's core value of decentralization, this means there’s no on-switch for Eth2. Improvements will ship incrementally over time.

These upgrades include the creation of a new chain called the Beacon Chain and up to 64 chains known as Shards.
These are separate to the Ethereum mainnet we use today but won’t replace it. Instead the main network will dock or 'merge' with this parallel system that’s being added over time.

In other words the Ethereum we use today will eventually embody all the features that we’re aiming towards in the Eth2 vision.

Roadmap:
Phase 0 - Beacon Chain (December 2020) launched and running
Phase 1 - Shard chain (2021) soon
Phase 1.5 - The docking (2022)
Phase 2 - still unclear (rollup-centric roadmap might make it unnecessary)

Let's understand what each one means:

Proof-of-Work:

Proof of Work (PoW) is the mechanism that allows the decentralized Ethereum network to come to consensus, or agree on things like account balances and the order of transactions. This prevents users "double spending" their coins and ensures that the Ethereum chain is incredibly difficult to attack or overwrite.

Proof-of-Work and Mining:

Proof-of-Work is the underlying algorithm that sets the difficulty and rules for the work miners do. Mining is the "work" itself. It's the act of adding valid blocks to the chain. This is important because the chain's length helps the network spot the valid Ethereum chain and understand Ethereum's current state. The more "work" done, the longer the chain, and the higher the block number, the more certain the network can be of the current state of things.

Proof-of-Stake:

Proof of Stake (PoS) is a type of consensus mechanism used by blockchain networks to achieve distributed consensus.
It requires users to stake their ETH to become a validator in the network. Validators are responsible for the same thing as miners in proof-of-work: ordering transactions and creating new blocks so that all nodes can agree on the state of the network.
Proof-of-stake comes with a number of improvements to the proof-of-work system:
● better energy efficiency – you don't need to use lots of energy mining blocks
● lower barriers to entry, reduced hardware requirements – you don't need elite hardware to stand a chance of creating new blocks
● stronger immunity to centralization – proof-of-stake should lead to more nodes in the network
● stronger support for shard chains – a key upgrade in scaling the Ethereum network

Additionally, a proof-of-stake system is kept secure by the fact that you'd need 51% of the total staked ETH to defraud the chain. And that your stake is slashed for malicious behaviour.

The Beacon Chain will introduce proof-of-stake to Ethereum. This is a new way for you to help keep Ethereum secure. Think of it like a public good that will make Ethereum healthier and earn you more ETH in the process. In practice, it will involve you staking ETH in order to activate validator* software. As a validator you will process transactions and create new blocks in the chain.
Staking and becoming a validator is easier than mining (how the network is currently secured). And it's hoped this will help make Ethereum more secure in the long run. The more people that participate in the network, the more decentralized and safe from attack it will become.

*A validator node in a proof-of-stake system is responsible for storing data, processing transactions, and adding new blocks to the blockchain. To become a full validator on the network, you will need to stake 32 ETH. If you don't have that much, or aren't willing to stake that much, you can join staking pools like Lasso Finance. These pools will let you stake less and earn fractions of the total rewards.

The Beacon Chain, at first, will exist separately to the Ethereum mainnet we use today. But eventually they will be connected. The plan is to “dock” mainnet into the proof-of-stake system that's controlled and coordinated by the Beacon Chain.

Important highlights about the Beacon chain:
● The beacon chain doesn't change anything about the Ethereum we use today.
● It will coordinate the network.
● It introduces proof-of-stake to the Ethereum ecosystem.

This is also an important change for the second Eth2 upgrade: shard chains.
Shard chains will be the second Eth2 upgrade. They’ll increase the capacity of the network and improve transaction speed by extending the network to 64 blockchains. The Beacon Chain is an important first step in introducing shard chains, because they require staking to work securely.

Eventually the Beacon Chain will also be responsible for randomly assigning stakers to validate shard chains. This is key to making it difficult for stakers to collude and take over a shard. Well, it means they have less than a 1 in a trillion chance.

Shard chains can only safely enter the Ethereum ecosystem with a proof-of-stake consensus mechanism in place. The Beacon Chain will introduce staking, paving the way for the shard chain upgrade to follow.

Concerning the Docking of the mainnet with Eth2:
● Eventually the current Ethereum mainnet will "dock" with the rest of the Eth2 upgrades.
● The docking will merge "Eth1" mainnet with the Eth2 beacon chain and sharding system.
● This will mark the end of proof-of-work for Ethereum, and the full transition to proof of stake.
● You might know this as "Phase 1.5" on technical roadmaps.

"The Ethereum ecosystem is likely to be all-in on rollups (plus some plasma and channels) as a scaling strategy for the near and mid-term future."  - Vitalik Buterin

Rollups are a type of layer 2 scaling solution that batches multiple transactions and submits them to the Ethereum main chain in a single transaction. This allows for reductions in gas costs and increases in transaction throughput. There are Optimistic and Zero-knowledge rollups which use different security methods to offer these scalability gains.

● The Beacon Chain went live on December 1, 2020.
● The introduction of shard chains, the second upgrade, is expected some time in 2021.
● The docking is when mainnet turns into a shard. This will come after a successful implementation of shard chains.

How do the upgrades fit together? Eth2 is not a migration or a single thing. It describes a set of upgrades being worked on to unlock Ethereum's true potential. This is how they all fit together:

Conclusively, today's takeaways are: understanding the difference between Proof-of-Work and Proof-of-Stake, knowing that the Beacon Chain is already up and running, in addition to how the transition has started. Also the importance of validator nodes and an overview of how it works, the benefits and reasons why this is all happening.