The Ethereum Merge: Everything You Need To Know
What is Ethereum?
Ethereum is a decentralized global blockchain software that enables you to make transactions, digital currency, and international payments interoperability; simply called out to be the second largest digital currency after bitcoin. Moreover, it is also used and designed to build, deploy and use decentralized applications (dApp). Decentralized apps don’t have a home on a single computer/server, they’re distributed across many computers which enables a more trusted infrastructure environment of your application.
It is considered the blockchain of choice for developers and enterprises that are creating technology based upon it to change the way many industries operate and how we go about our daily lives.
What is Ethereum 2.0?
Now an upgraded version of Ethereum soon to be available in the market, called out to be Ethereum 2.0 (the merge), designed to enhance the speed and efficiency of transactions.
Ethereum 2.0 is not a new asset, but is the name given to a set of updates coming to the Ethereum Network. The initial updates will see Ethereum merging with the Beacon Chain and transitioning from a proof of work (PoW) consensus to proof of stake (PoS). Over the next few years, additional updates such as sharding will roll out.
What Is the Ethereum Merge?
The merge is one of the trending topics in the world of cryptocurrency & blockchain tech in 2022; the Ethereum mainnet is designed to merge with the Beacon Chain’s proof-of-stake (PoS). The merge is a much-awaited user experience change to the Ethereum system; it refers to the merging of execution layer of Ethereum (which is used today).
In simple words, the merge refers to the transition of Ethereum from a corroborated consensus algorithm to one that uses proof of stake. Moreover, it comprises an inefficient proof-of-work protocol.
What Are Proof-of-Work (PoW) and Proof-of-Stake (PoS)?
In the world of cryptocurrency, you may have heard about proof of work (PoW) and proof of stake (PoS). These two systems play an essential role in cryptocurrency transactions and safety. Moreover, they are called to be the building blocks of blockchain technology.
Proof-of-work and proof-of-stake are renowned as consensus mechanisms. They make sure in different ways that people are honest with their transactions. However, it’s the best way to avoid fraud, such as double-spending.
Knowing the difference between proof-of-work and stake will help you learn about mining.
● In proof-of-work, the cryptocurrency depends on miners to mine crypto coins by performing complex mathematical calculations energy consuming graphics cards and extra hardware.
● In proof-of-stake, the cryptocurrency is generated through a process called “staking,” where users are rewarded for holding their tokens.
How Will the Ethereum Merge Occur?
Eth2, Ethereum 2.0, ETH 2.0. You may have heard these terms in the past, but this year Ethereum community set up a name called “the merge”.
The merge is a long-awaited Ethereum upgrade designed to enhance the network. These upgrades happen generally, but this one is important to mark, as this is not an ordinary one.
The merge is considered to join the current Ethereum manner or the Ethereum blockchain with something called Beacon Chain. Both chains work in parallel. But, if you talk about Ethereum Magnet, which is currently working on a mechanism called proof-of-work, which processes transactions.
However, when the merge is about to finish, the Ethereum mainnet will be transferred from proof-of-work rather than adopt the Beacon Chain’s proof-of-stake mechanism.
Shadow Forks and Testnets
A shadow fork is when a new developer network is created by forking a live network using a small number of nodes. Ropsten — named, by convention, after a metro station in Stockholm, Sweden — is the closest to the production environment of Ethereum of all its testnets, and has operated continuously since 2016.
Testing mechanisms like shadow forks decline’s execution risk for long-term Ethereum believers. The testnet lies in blockchain technology software used for testing without risk to the main chain. Also, they work in such a way without affecting the main chain. Think of it as a UAT, DEV an PROD environment if you’ve developed in today’s world of Cloud apps development like AWS, Azure or Google Cloud.
Validator Node and Traditional Node
Validator nodes are the node type that can generate network blocks but needs a resource commitment. Well, that resource could be mining power under PoW rules or ETH. These nodes get a protocol for providing support to the Ethereum network.
Traditional nodes can function on a computer connected to the network 24/7 without resource commitment. They cannot generate blocks but can listen for new blocks and check validity.
Along with this, the 32 ETH staking requirement is only for users willing to run a validator node. However, people ready to use a non-validator node have no financial problems. But, if you have below 32 ETH, you can still stake by committing to stake providers.
Will Ethereum Merge Reduce the Network Gas Fees?
The Ethereum merge will not change the network’s gas fees, regardless of what people believe from this merge. Neither enlarging the network capacity nor facilitating more efficient transactions.
It is a consensus mechanism and will anticipate the way for future transactions and fee improvements, but lower gas fees may not help. To understand this, you must understand how Ethereum gas fees work.
Ethereum gas fees refer to the consequence of network demand versus network capacity. Gas fees will rise as the network reaches maximum power limits and increased demand. Gas fees are related to block space demand. The merge does nothing to increase block size nor does it decrease demand for block space which would be counterproductive to the health of the network.
Furthermore, the merge does not impact this co-relation. However, future upgrades may offer advancements. The transfer to PoS will establish the base for sharding and higher throughput. Those upgrades will not be workable after a long time, although there is no definite time for mainnet activation.
In addition, many new old/new projects are creating a layer 2 solution, with prominent growth that guarantees easier network transactions within the Ethereum network.
What Are the Implications of the Ethereum Merge?
The major implications are to take care of the energy-intensive mining process while also securing the network using staked ETH. The move is expected to provide for more security, sustainability, and scalability to Ethereum’s network.
There are 3 major implications of the Ethereum merge:
- The reduction of transaction costs.
- The increase in the number of transactions per block.
- Reduce energy consumption. (Environmental friendly ecosystem)
1. Reduction of Transaction Costs
As we know, the cost of sending a transaction depends on the amount of data involved. If the size of the data increases, then the cost also rises. This is why most cryptocurrencies have limited sizes for their transactions.
However, Ethereum has reduced its transaction costs through smart contracts. Smart contracts allow developers to build applications without worrying about blockchain technology’s technicalities.
Smart contract development allows people to create decentralized apps (dApps) using the Ethereum platform. DApps are similar to web-applications since they provide services to users. However, unlike traditional websites, these apps do not need any centralized server as their infrastructure. Instead, they rely on the Ethereum network through computers.
This means that dApps are completely free from third parties. With the Ethereum merge, dApp developers or Blockchain engineers can develop more complex applications. As a result, the cost of transactions will decrease.
2. Increase in Transactions Per Block
Another implication of the Ethereum merge is an increase in the number of blocks produced by the network. In other words, it will produce more blocks than before.
If the number of blocks increases, the total number of transactions will also increase. Therefore, this will lead to a significant increase in the number of ETH sent during each block.
3. Reduction of Energy Consumption
The merge will also reduce the energy consumed by the network. This is because the network will use fewer computing resources.
Transferring from Proof of Work <PoW> to Proof of Stake <PoS> will make the process much faster. It will also require less energy. This is because the new consensus mechanism requires less computational power, dramatically reduces energy expenditure.
There is also no benefit to be had by investing in more powerful hardware under proof-of-stake, so there is no arms-race condition and less electronic waste. Ethereum validators can run on typical laptops or low-power devices such as Raspberry Pi.
This will not only save energy but also help in reducing carbon emissions. As a result, the environment will benefit as well.
Are There Any Drawbacks to the Ethereum Merge?
The Ethereum merge is considered one of the best things that happened to Ethereum. However, there are some drawbacks. For example, the merge could cause problems if the network becomes congested, I believe there’s a rollback plan in case of any issues.
The Ethereum network may become congested due to the increased number of transactions per block. When the network becomes clogged, it can take longer to process transactions.
Therefore, the Ethereum network might experience delays in processing transactions. This delay would affect all users who use the network.
However, the Ethereum Team is working hard to avoid this problem. They are planning to implement solutions such as sharding and Casper. These solutions will help the network to handle more transactions in the near future.
5 Key Phases
Vitalik Buterin founder of Ethereum, claims that Ethereum will be able to to process “100,000 transactions per second”, following the completion of 5 key phases:
- The Merge
2. The Surge
3. The Verge
4. The Purge
5. The Splurge
Conclusion
In conclusion, the Ethereum merge is a great thing. It will improve the Ethereum network’s performance and make it more secure. Transferring from PoW to PoS will also reduce Ethereum’s energy consumption by 99.95%. This will save the environment.
Furthermore, the Ethereum merge will reduce transaction costs and The number of transactions per block will also increase. All these factors will contribute to making the Ethereum network a better ecosystem to not only exchange currency but also to build decentralized applications (dApps) for consumers. We hope to see something big coming out of this merge which could result to the modernizing traditional technology and an increase to ETH’s price.
