Living in a post-merge paradise

That follow through, babyyy! Two years in the making, and the merge is finally complete! Like Vitalik Buterin said, on September 15th at 2:42 am EST, the POS Beacon Chain successfully merged with the existing execution layer and moved that mainnet right on over to a Proof-of-Stake(PoS) consensus mechanism. 


To recap RQ, Proof-of-Work (PoW) requires miners to compete using high-energy computer hardware to solve problems. PoS requires a validator to have a stake of 32 ETH to validate ETH, which can be done from a laptop. Full merge recap here. Ethereum developers can now focus on scalability upgrades.

By Nargiza Schmidt

25th September 2022

What’s next?

Vitalik said Ethereum is 55% complete after the merge so we will encounter new upgrades. The main goal is to increase scalability, which will increase transaction speed. Currently, Ethereum can only process 30 transactions per second. Once completed, Ethereum will be able to process 100,000 transactions per second. When transaction speeds increase, gas fees are estimated to go from $0.25 to $0.002 with rollups. The Ethereum foundation doesn’t have an exact timeline for when each upgrade will happen, but they estimate that sharding will be completed sometime in 2023. Five upgrades have been outlined so far: surge, verge, purge, and splurge. 

 

The Surge 

In the surge, we’ll examine two major ways scalability will increase: Sharding and Rollups.

 

Sharding

Sharding is considered on-chain scaling because these changes happen on the mainnet or Layer 1 of Ethereum. Sharding splits a blockchain into smaller pieces, known as “shards.” These are new chains that will increase number of  transactions processed per second. 

Features of Sharding

  1. Anyone can run a node.
  2. Less hardware will be needed making it more affordable to validate.

 

Rollups

Rollups works synergistically with sharding. They are off-chain scaling solutions because they happen on Layer 2. Rollups allow dapps to consolidate or “rollup” many transactions into a single one and submit it to the mainnet. It’s kind of like when you roll up your clothes in a dresser instead of folding, which reduces the amount of space they take up. Similarly, Layer 2 rollups reduce the amount of data needed for transactions making room for more transactions. Layer 2 was created to help with scaling solutions off of the mainnet without losing that sweet, sweet decentralization and security. There are two types of rollups:

Optimistic rollups – These have a time limit that assumes the transactions are valid by default. 

Zero-knowledge rollups – Computation is run off-chain, then these submit validity proof to the chain. 

 

The Verge  

The verge will implement Verkle trees, a type of mathematical proof. Verkle trees will allow anyone to become a network validator without having to store a large amount of data. This upgrade will optimize storage, reduce node size, and ultimately make Ethereum more scalable. 

 

The Purge 

Not to be confused with the dystopian horror film. The only thing getting purged here is the hard drive space needed for validators. This streamlines storage, which reduces network congestion and eliminates historical data and bad debt. Vitalik said that Ethereum should reach 100,000 transactions per second by the end of this phase. 

 

The Splurge 

The Splurge is a series of smaller upgrades ensuring the network runs smoothly following the prior four stages. 

Ethereum’s merge controversy

Is Eth going to be centralized?

Coinbase, a crypto exchange, and Lido, a staking protocol, added over 40% of the network’s new blocks in the hours following the merge. With large stakes being owned by companies like CoinBase, there’s a higher chance that Ethereum will become more centralized. 

 

Is Proof-of-Work Ethereum dead?

Miners didn’t want to lose that source of income, so there’s a version(fork) of Ethereum using PoW. However, some of the energy consumption decreased by the Ethereum mainnet will be negated by that. For this reason, OpenSea, the biggest NFT marketplace, is not supporting any PoW Eth forks. 

 

Why did Ethereum drop after the merge?

Several factors contribute to the drop after the merge. Here are a few: 

 

  • A .75% rise in the U.S. interest rate occurred on Wednesday, September 21, indicating that the Federal Reserve isn’t letting up anytime soon.  
  • The Ethereum merge was a “buy the rumor, sell the news” event.
  • The Securities and Exchange Commission Chairman Gary Gensler says staking qualifies PoS cryptocurrencies as securities
  • Twenty million dollars worth of Ether was dropped by Ethereum miners after the merge. 

To Recap

The merge is complete, so here comes the scalability! Transaction speeds are about to increase, gas fees will go down, and ETH is about to be more accessible than ever. That being said, there’s some skepticism surrounding Ethereum being more centralized and miners making a comeback on ETH forks which will subsequently cause another heatwave (jk). Those concerns aside, PoS ETH has a bright future, addressing many hang-ups many non-crypto users and businesses have with cryptocurrency. Pretty soon, we’ll be accepting payment through Venmo, Cash App, and ETH 😉. 

FAQs

Nothing will happen to the Ethereum you have now. It will still be there, so you don’t have to transfer it or swap it for anything. Be extra careful if you see someone posting about buying ETH 2.0 because that is very much not a thing. Ethereum before and after the merge will be called Ethereum.

After the merge, Ethereum’s issuance will decrease by almost 90%, meaning that it could become a deflationary asset. If it becomes a deflationary asset, it can hold more value over time.

Layer 2s are built on an existing blockchain and substantially increase the scalability and use cases of Ethereum. Examples of Layer 2 solutions are Polygon, Optimism, and Boba. The main goal of scalability is to increase transactions per second without sacrificing the decentralization or security of the base blockchain. Increasing transactions per second also helps lower transaction fees. As far as the merge is concerned, the base blockchain AKA Layer 1, AKA the mainnet, won’t become much more scalable until sharding occurs in later upgrades, so it’s unlikely L2s will be affected immediately after the merge. If you want more information on Layer 2s, check here

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