Here’s what you can expect from Ethereum’s long-awaited “Merge” upgrade

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The Ethereum upgrade, for­mer­ly Ethereum 2.0 or Eth2, is one of the most antic­i­pat­ed upgrades in the world of blockchain tech­nol­o­gy, and Ethereum investors can­not wait.

While the Eth2 name stuck, the Ethereum Foun­da­tion itself changed the ter­mi­nol­o­gy. Today, you would sim­ply refer to it as the ‘con­sen­sus lay­er’ that oper­ates on the orig­i­nal blockchain.

The upgrade, which will be rolled out in sev­er­al phas­es, is intend­ed to make the Ethereum net­work more scal­able and acces­si­ble and increase the secu­ri­ty of the network.

Ethereum’s upcom­ing upgrade includes sev­er­al changes to the network’s infra­struc­ture, start­ing with the change from proof-of-work (PoW) to proof-of-stake (PoS) con­sen­sus mech­a­nisms, fol­lowed by shard­ing chains and fur­ther updates down the road.

A Proof-of-Stake Blockchain

The move to PoS is sig­nif­i­cant for Ethereum as it changes the incen­tives for val­i­dat­ing the Ethereum Blockchain.

Pre­vi­ous­ly, min­ers ran the nodes and need­ed a lot of ener­gy to mine the next block.

These two ele­ments — min­ers and ener­gy — are elim­i­nat­ed in the PoS con­sen­sus mech­a­nism and replaced by val­ida­tors and stak­ing, result­ing in a more than 99.9% reduc­tion in power.

The val­ida­tors have to deposit 32 ETH to par­tic­i­pate in the ran­dom val­i­da­tion process, in which the net­work pays them for val­i­dat­ing transactions.

If a val­ida­tor is not online and can­not exe­cute its actions, the block reward for this spe­cif­ic val­ida­tor might decrease. Mali­cious attempts by val­ida­tors to com­pro­mise the net­work would end in a worse out­come, as their deposit of 32 ETH could be ‘slashed’.

The advan­tages of PoS for Ethereum in overview:

  • Proof-of-Work required GPUs (Graph­ic Pro­cess­ing Units) in order to par­tic­i­pate in the min­ing process; demand was so high that the reg­u­lar mar­ket was affect­ed in form from short­ages of spe­cif­ic GPU series
  • Less cen­tral­iza­tion risk, as any­one can become a staker
  • ETH issuance dropped from 4.3% to 0.43%, which can make it defla­tion­ary, togeth­er with the burned ETH (since EIP-1559)
  • Strict penal­ties for bad actors; attack­ers can be removed as stak­ers, and there are also eco­nom­ic penalties

The Merge: Beacon Chain + Ethereum Mainnet

The first phase began with the ‘Bea­con Chain’ upgrade, which went live on Dec. 1, 2020.

The Bea­con Chain includ­ed the fea­ture for native stak­ing on the Ethereum blockchain as the basis for the switch to PoS.  The new upcom­ing ‘merge’ will com­bine the Bea­con Chain with the Ethereum mainnet.

In the final phase, the focus is on blockchain shard­ing. To improve the scal­a­bil­i­ty of the Ethereum main­net, all oper­a­tions will be exe­cut­ed on 64 shard chains in the future.

Ethereum Merge; Ethereum Foundation
Ethereum Merge (via Ethereum Foun­da­tion)

This shard­ing tech­nique makes it cheap­er for layer‑2 blockchains to build on Ethereum; the rollup/bundled trans­ac­tion costs will go down, as well as the mem­o­ry spec­i­fi­ca­tions required to run an Ethereum full node.

More Coming For Ethereum After The Merge

At the Ethereum Com­mu­ni­ty Con­fer­ence in France from July 19–21, Ethereum Co-Founder Vita­lik Buterin talked about what is next after the merge.

Buterin said the switch to PoS, increas­ing the scal­a­bil­i­ty, and the merge is just some of the first series of upgrades.

“Ethereum today can process about 15–20 trans­ac­tions a sec­ond. This Ethereum includ­ing the rollups, includ­ing the shard­ing […] it’s going to be able to process 100,000 trans­ac­tions a second.”

To put those 100,000 trans­ac­tions a sec­ond into per­spec­tive, the pay­ment oper­a­tor VISA exe­cutes on aver­age just 1,7000 trans­ac­tions per sec­ond; Bit­coin just around 4.6 per second.

Buterin also has the names for the next phas­es already (they were also on the orig­i­nal roadmap) – ‘surge’ (includes the shard­ing), ‘verge’ (Verkle trees), ‘purge’ (purge of old net­work his­to­ry), and ‘splurge’ (‘All the oth­er fun stuff’).

More­over, Buterin told the inter­est­ed com­mu­ni­ty mem­bers in France that he thinks that Ethereum “is just 40% com­plete.” After the merge, which should hap­pen in Sep­tem­ber, it will be at “rough­ly 55%.”

Here is the full roadmap of Ethereum, includ­ing the next phas­es after the merge:

Ethereum Consensus Layer (‘Eth2’) Roadmap
Ethereum Con­sen­sus Lay­er (‘Eth2’) Roadmap

Exciting Times Ahead For Ethereum

Vita­lik and oth­ers have been work­ing on Ethereum since 2013.

In August 2014, the nowa­days-leg­endary Ethereum ICO start­ed, the very first time one could have bought ETH in a pub­lic sale.

With the pro­ceeds, the team has con­tin­ued to build out the Ethereum blockchain and tech­nol­o­gy. While it has its flaws, Ethereum is still the biggest blockchain-ecosys­tem out there, with a tremen­dous net­work effect.

In Sep­tem­ber, the merge is expect­ed to hap­pen final­ly. Togeth­er with the upcom­ing intro­duc­tion of shard chains, scal­a­bil­i­ty, secu­ri­ty, and acces­si­bil­i­ty will all be pos­i­tive­ly influ­enced by the upgrade.

Post­ed In: Analy­sis, ETH 2.0

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