What Happened in Ethereum Merge?
The Ethereum Merge finally happened on Sept 6, 2022. So, what does this mean for the future of Ethereum? The Merge brought together the ETH and ETC chains, which had split since the DAO (decentralized autonomous organization) in 2016. The Merge was a long-awaited event for the Ethereum community, which has significant implications for the platform’s future.
In this blog post, we’ll explore the impact of Ethereum Merge and what it means for the platform’s future. We will also discuss how you can use Ethereum going forward.
But, before proceeding further, let’s briefly overview Ethereum.
What is Ethereum?
Ethereum is a decentralized platform that supports smart contracts, programs, or applications that execute safely as intended with no chance of fraud or outside interference. It’s a general-purpose blockchain that can be written in Solidity and is used to complete peer-to-peer transactions. It can also execute scripts and store data in a decentralized form.
Ethereum is also a programming language running on a blockchain that can be used to create decentralized applications (dApps). The key difference between Ethereum and Bitcoin is that Ethereum is much more than just a cryptocurrency.
The native currency of Ethereum is called ether. It is used to pay for gas, a unit of computation used in transactions and other state transitions. Gas is necessary to ensure that users are not incentivized to perform analyses without value.
In the Ethereum network, there are two types of accounts: externally owned accounts (EOAs), which are controlled by private keys, and smart contracts, which are held by their contract code. Contract code cannot be modified once deployed to the network.
Transactions on the Ethernet network are grouped into “blocks” and then chained together through cryptographic links called “hashes.” It forms the basis of blockchain, allowing Ethereum to achieve consensus among all participating nodes on the network about the ledger’s state.
What is the Ethereum Merge?
Now, it has been one month since Ethereum Merge. So, what happened in Ethereum Merge?
Let’s take a deep dive into the Ethereum Merge.!
The Merge enables exciting new features and upgrades, including proof-of-stake (PoS) support. Let’s take a closer look.
(PoS) proof-of-stake is a huge step forward for Ethereum, enabling the network to be more efficient and secure. Sharding is a major improvement, allowing the network to process more transactions in parallel. Ethereum Merge is a positive development that will help make the platform more powerful and valuable.
What Does It Mean for ETH Holders?
For ETH holders, the Merge means they now have access to both the old and new versions of Ethereum. It can be beneficial because it allows users to take advantage of the best features of both platforms.
However, it also means that users must be careful when choosing versions of Ethereum to use for their transactions.
How will Proof-of-Stake Work?
The proof-of-stake, also known as PoS, is a type of algorithm used to achieve distributed consensus.
PoS is a replacement for the proof-of-work that’s seen in bitcoin.
Proof-of-stake is an alternative to the traditional protocol of proof-of-work, or PoW, in which miners invest their time and resources for the chance to verify blocks.
Many cryptocurrency designers have proposed proof-of-stake as a better and more energy-efficient means to provide security than proof-of-work. Some alternative cryptocurrencies are implementing this type of design.
Why Switch to Proof-of-Stake (PoS) from Proof-of-Work (PoW)?
Ethereum switched from a PoW system to a PoS system for three main reasons:-
A network that uses PoS is more secure and decentralized-
Few participants can independently validate due to the high mining cost, and most users participate in mining pools. Thus, most blocks are constructed and proposed by mining pools. As a result, the network is controlled by a small, highly centralized group. For instance, according to cryptocurrency analytics firm Crypto Compare, 5 Ethereum mining pools were responsible for 65.4% of the total ETH in 2021.
Ethereum requires a minimum of 16,384 validators under PoS, which greatly increases network security and makes it much more decentralized.
PoS makes scaling possible through sharding-
The first step in enabling sharding, which divides the network into “shard chains” that share the load of Ethereum and theoretically reduce network congestion and boost transaction throughput, was to convert the network to PoS. These shard chains divided operations among 64 new chains instead of settling all transactions on a single blockchain. In 2023, sharding should allow the network to scale in enormous leaps.
The Ethereum community is becoming increasingly interested in Danksharding, a more recent sharding design. With Danksharding, the Proposer/Builder Separation (PBS) idea and previous sharding designs are significantly simplified.
Sharding is anticipated to boost Ethereum’s transaction throughput to 100,000 transactions per second once implemented, outpacing all major credit card providers in terms of throughput.
PoS is more energy-efficient than PoW, using 99% less of it-
PoS eliminates the need for proof-of-work computations to consume significant energy. As a result, the energy required to secure the network was reduced by 99.9% due to Ethereum switching to PoS.
Benefits or Advantages of Proof-of-Stake?
Proof-of-stake is a consensus algorithm that eliminates the need for mining, reducing the amount of electricity and computational power required. It will benefit countries with low power and industries that rely heavily on distributed ledger technologies, such as finance and supply chain management.
Proof-of-Stake can:
- Reduce the amount of mining required to solve blocks, reducing the pressure on electricity and computational power;
- Serve as a less expensive alternative to proof-of-work;
- Eliminate energy wastage through mining by moving it to validation.
What Changed After the Merge?
The Merge transforms Ethereum in many essential ways. Let’s have a look at those:-
- Validators replaced miners.
- Increased time to block finality.
- Added stakes come with new penalties.
- Validators used the MEV-boost auction to access MEV.
- New economic actors are produced by block building.
- Made a 90%reduction in the block reward subsidy
- May impact MEV dynamics by fixed block times
