GZ Daily — The Merge, Surge, Verge, Purge, and Splurge of the Ethereum Blockchain
Ground Zero Daily covers the most recent news from the crypto and blockchain space.
This article is divided into two sections. The first, in which we discuss and openly criticize the current state of the Ethereum blockchain, and the second, in which we consider Ethereum’s proposed roadmap and its implications on the project.
Ethereum Under Fire
Ethereum has recently been under a lot of criticism over delayed updates, high gas fees, scalability issues, and a relatively small number of transactions per second compared to its rivals.
At the time of writing, the average gas fee for an ERC20 transfer is around $30, with the Uniswap swap fee going as high as $95. [1] So let’s be straight on this one — the current gas fees make Ethereum unusable for small investors and newcomers to crypto.
“The Internet of money should not cost 5 cents per transaction.”
Vitalik Buterin, December 2017
Before we dig into the story, let’s see what Vitalik Butering had to say about transaction fees back in December 2017.
If Ethereum as a project would be judged by the words of its founder, it wouldn’t fare very well. The blockchain’s fees today are 100-fold larger than what he claimed was unacceptable just over four years ago.
And the investors are taking note.
Solana, Cardano, Polkadot, Avalanche, Terra, and Algorand all achieved greater growth than Ethereum last year. [2] They are all Layer 1 chains, all direct competitors to Ethereum, all faster and easier to use. We can argue that lower-cap coins have an easier path to exponential growth, which is certainly true, but that is not the point here. The point is that these lower-cap coins are attracting new users, while Ethereum is not.
Consider the case of Blackberry for example. It had the head start, the tech was amazing, it was extremely secure and it looked decent for a phone of its time. But more importantly, early Blackberry had no competition. As soon as a new generation of smartphones was introduced by the likes of Apple and Google, the audience shifted away from Blackberry, never to return. At the end of the day, it was not a question of who’s phones had better tech, but who’s phones attracted more users.
The same is currently happening with Ethereum.
With the increasing gas fees and low transaction capacity, Ethereum is no longer the technology that was promised to us. Users are migrating to new blockchains that offer the same tech for a fraction of the cost. The number of new DeFi projects deployed outside of the Ethereum environment is growing at a breakneck pace. If the trend continues, Ethereum will lose a major portion of its user base and the price will reduce significantly.
Ethereum would no longer be the key player, the market-maker, and the world's second-largest cryptocurrency. The flippening would never arrive. Whales would get hurt and Buterin would go from being a multi-billionaire to being a multi-millionaire (give or take a few zeros from both).
But the world would go on. Crypto would go on.
Development on new blockchains had already started and it cannot be stopped now. Too much is at stake. Not everyone’s success depends on Ethereum’s success.
Blockchains like Avalanche already formed a developed ecosystem that enables pretty-much everything that Ethereum does. [3] The same level of development is happening with other blockchains. Surely there will be hiccups along the way and a lot of these projects will eventually fail, but the promise of decentralized Internet would continue to live on with or without Ethereum.
If Ethereum wants to survive it needs to evolve ASAP.
Ethereum’s Endgame
Vitalik Buterin recently published an article titled Endgame, in which he discussed different approaches to scaling Ethereum [4]. The article is highly technical and requires a mathematical background that few of us have, so we will not try to pretend we understand every word of it. However, the key facts are straightforward:
- The size of the Ethereum blockchain has increased. A lot. And there are problems related to the sizes of very big blockchains.
- These problems are difficult. So difficult in fact that there is no perfect solution for each of the problems. Each solution comes with a bit of drawback.
- In order to tackle these problems, a new roadmap is designed. With a lot of work and a bit of luck, it just might be enough to propel Ethereum to new heights.
So without further ado, let’s reveal the new roadmap. [5]
The roadmap is complex and highly technical. Here are the main phases:
- The Merge — Full transition to PoS.
- The Surge — Massive scalability increases for rollups through sharding.
- The Verge — Statelessness through Verkle trees and related features.
- The Purge — Eliminating historical data and technical debt.
- The Splurge — Miscellaneous but important extras.
Let’s try to break these down into a less technical language.
The Merge
The Merge is the most simple of the phases. It means a full transition from a PoW to a Pos. [6][7]
A lot of development on this phase has already been completed and some blockchains already operate under PoS. According to Buterin, the full specification for The Merge has recently been completed, testnets are running it, bugs are being fixed and the team is getting ready for full implementation. Once done, there will be a hard fork of the Ethereum blockchain. [8]
The Surge
The Surge is a massive increase in the scalability for rollups through sharding. According to Buterin, this will allow for transactions to happen much more cheaply. The upgrade should reduce the fees while still maintaining a high level of security on the blockchain.
The Verge
It gets a bit more technical here.
Basically, there is a planned transition from Merkle trees to Verkle trees. You can think of them as “databases” or “state machines” where all the data of the Ethereum blockchain is stored. The Ethereum blockchain is already big and it keeps getting bigger every day.
The Verge implementation should allow for a simpler validation on the blockchain. This should in turn make validation scalable, faster, and much easier to set up. It should further decentralize the network.
The Purge
The Purge means that not all nodes have to permanently store all of the historical blocks. Instead, clients will stop storing history that is more than one year old. This means that hardware requirements for nodes will decrease and the bandwidth of the network will reduce.
The Splurge
These are miscellaneous upgrades that should simplify the use of Ethereum and make it more accessible to an average user.
For an in-depth look at each of the phases, please watch the latest podcast by The Bankless, featuring Ethereum’s founder Vitalik Buterin.
Conclusion
Ethereum is currently on a critical journey that will most probably determine the outcome of the world’s second-largest cryptocurrency. The stakes have never been higher.
Competing blockchains are acquiring users at a quicker pace, offering them higher scalability, smaller fees, and shorter transaction times. The coin prices of these new blockchains are also providing strong returns for the investors.
On the other hand, Ethereum is still the most dominant smart-contract blockchain in the world with a total market cap of $457 billion. Everything else is in the hand of the developers. If the phases laid out in the roadmap can truly modernize Ethereum and place it side by side with the most agile blockchains of today, then ETH price will almost certainly surge to new heights.
The year 2022 will probably be the make-or-break year for Ethereum. We wish them all the luck in the world!
For more articles, analysis and news, follow Ground Zero on Telegram and Twitter.
Cheers,
- The Ground Zero team
References:
- Ethereum Gas Tracker, January 2022. Available at: https://etherscan.io/gastracker
- Tera LUNA, CoinMarketCap.com, January 2022. Available at: https://coinmarketcap.com/currencies/terra-luna/
- Avalanche, Twitter.com, January 2022. Available at: https://twitter.com/avalancheavax/status/1402331073485414406
- Endgame, Vitalik Buterin, Vitalik.ca, December 2021. Available at: https://vitalik.ca/general/2021/12/06/endgame.html
- Vitalik Buterin, Twitter.com, December 2021. Available at: https://twitter.com/VitalikButerin/status/1466411377107558402/photo/1
- Proof of Work, Jake Frankenfield, Investopedia.com, July 2021. Available at: https://www.investopedia.com/terms/p/proof-work.asp
- Proof of Stake, Wikipedia, December 2021. Available at: https://en.wikipedia.org/wiki/Proof_of_stake
- Hard Fork, Jake Frankenfield, Investopedia.com, June 2021. Available at: https://www.investopedia.com/terms/h/hard-fork.asp
