Updated: Apr 4
The countdown for the Ethereum Merge has begun! After about seven years, the process that will get Ethereum to Proof-of-Stake (PoS) is ready and expected for the 14th of September.
This is the most significant upgrade in the history of Ethereum and the most critical day in cryptocurrency history. Thanks to this upgrade, Ethereum will be more scalable - only thanks to the later sharding - and energy-efficient.
A new era has come: Ethereum 2.0 is finally ready!
What does the Merge mean? And what are the motivations behind it?
The term Merge was already the milestone in this blockchain’s roadmap before the launch.
Its main goal is the transition of Ethereum from a proof-of-work consensus mechanism, also known as mining, to a proof-of-stake model where there are no miners and a group of validators, staking their ETH, will validate the network.
The roadmap to The Merge consists of two steps:
The first is characterized by the launch of the Beacon Chain (an infrastructure created for this purpose on December 1st 2020), which allows them to test it without impacting the existing PoW network for around 1.5 years. At the same time, it has also permitted to reach the right amount of staked ETH to secure the network at the merge. Read more about it in this Ethereum 2.0 overview.
The second is the so-called The Merge, the process that joins the consensus layer of the Beacon Chain with the EVM state of the Ethereum PoW chain.
This transition reduces power consumption by around 99.95%, silencing all the controversies concerning the energy waste of the crypto industry and making the Ethereum ecosystem ESG compliant (ESG stands for Environmental, Social, and Governance).
The merge was an eagerly-awaited event by the community because it completely changed the state of things in this network. But what are the motivations behind this revolutionary event?
First of all, the reduction in the ETH issuance should be decreased by 90%, thus forcing the asset to assume a deflationary state (because when the Merge will be fully completed, the PoW will be replaced by the PoS, reducing ETH issuance, also known as Triple Halving).
Ethereum validators will be able to secure the network from home because being a consensus participant will no longer mainly be for institutions and miners, making the network more hack-resistant and decentralized.
How does this upgrade function?
Thanks to the successful Bellatrix update, which enables stakers to produce blocks containing the codebase supporting the unification of Ethereum's two “layers”, the Merge can finally be completed by joining the Ethereum Beacon Chain (again, the PoS detached version) with its mainnet.
Next week, the Paris update will permanently transfer the network execution level, changing how ETH is created and validated for all users.
After analyzing the reasons for the Merge, it’s essential to understand the mechanism behind this upgrade. The most delicate and troublesome aspect is that these two systems must run parallel: on one hand, the PoS testing and, on the other hand, the continuous and correct operations of the network with the previous features. The merge marks the switch from PoW to PoS without stopping the main engine or halting the block production.
What issues solve this upgrade?
Will The Merge reduce the Ethereum gas fees?
The switch from PoW to PoS and the deployment of the Merge do not change anything about the gas fees. Only future upgrades, like the Sharding, will bring down fees.
Will The Merge increase Ethereum transaction times?
The Merge will slightly decrease Ethereum transaction times. Under the PoW, Ethereum generates a block every around 13 seconds. The Merge will reduce the block time variance, making the transaction confirmation process more than 10% faster, around 12 seconds.
Will staking APR increase after The Merge?
According to Ethereum.org, the staking yields will likely increase after The Merge, as transaction fees begin to go to validators rather than miners. The prediction of the APR for staking will reach 7% after the Merge.
Can staked ETHs be withdrawn after The Merge?
Not immediately. Staked ETHs will remain locked on the Beacon Chain until the Shanghai upgrade runs. Withdrawals will be enabled following the planned Shanghai upgrade.
How many ETH do you need to stake to run a node after The Merge?
After the Merge, you'll still need to stake at least 32 ETH to activate your validator. However, you will also be able to share a validator with others through pooled staking or staking-as-a-service platforms and centralized exchanges.
Will Ethereum use shard chains after The Merge?
Shard chains are not expected to be implemented until 2023.
Will The Merge cause Ethereum to go offline?
Ethereum will continue to operate during The Merge. However, many exchanges will probably pause deposits and withdrawals during the Merge.
What are the implications of the Merge and what next?
The Merge is still smoothly completed on the Goerli testnet, and the union with the mainnet is expected tomorrow. The Merge upgrade will not include anticipated features and benefits such as the ability to withdraw staked ETH to provide a successful transition to proof-of-stake. The next upgrade, the so-called Shanghai upgrade, is planned to follow The Merge, which is expected to occur in early 2023.
After the deployment of the Merge, the Ethereum Foundation will launch the Shangai upgrade that introduces changes in the network’s layer2 protocols, splitting up code from data and addressing three crucial issues:
Beacon Chain withdrawals. Currently, the ETH stakers cannot withdraw their rewards and funds from their validator balance;
Reduction of the gas fees for layer2 equalizing the block sizes and increasing the CALL DATA functionality, raising the level of competitiveness with other faster chains such as Solana and Cardano;
Changes in the EVM object format, introducing EIP-3540 will split up code from data and the release of new contract code section types to solve complicated features such as Account Abstraction, control flow in EVM and EIP-3074.
After the Merge, the most awaited event, the Sharding -probably in 2023- will completely revolutionize the Ethereum network as we know it today regarding scalability and capacity. It depends on how quickly and efficiently will work the progress after the Merge.
The sharding is a computer science process in which a database is split horizontally to spread the load capacity. In the Ethereum ecosystem, the sharding will work together with the layer 2 rollups giving them the capacity to handle the huge amount of data. This feature will increase the number of transactions per second, reducing network congestion. This upgrade also increases network participation requiring lower hardware and permitting you to run Ethereum on a personal laptop or smartphone, implementing the true concept of decentralization.
Here you can find all the information you need about the Merge published by Binance Academy.
After this Merge, a new Ethereum era will come. This network will become more secure, sustainable and ready for the new upgrades: the Surge, the Verge, the Purge and the Splurge. The shift in the PoS consensus mechanism will underline the gap with the Bitcoin protocol (PoW), highlighting this blockchain's qualities that will allow the entire ecosystem to grow exponentially in the coming years.
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