The Merge was the union of Ethereum's new proof-of-stake consensus layer, the Beacon Chain, with its original execution layer, the Mainnet, which has been around since its inception. It made it unnecessary to use energy-intensive mining and allowed the network to be secured with staked ETH instead. As a result, more scalability, security, and sustainability made it a fascinating step in bringing the Ethereum goal to life.
The Beacon Chain was first operating aside and independently from Mainnet. While the Beacon Chain functioned in parallel using proof-of-stake, the Ethereum Mainnet, with all of its accounts, balances, smart contracts, and blockchain information, continued to be secured by proof-of-work. When these two systems finally converged during The Merge, proof-of-stake superseded proof-of-work.
- Proof-of-stake is now used on the Ethereum Mainnet, but it wasn't always the case.
- The Merge is the name for transitioning from the original proof-of-work system to proof-of-stake.
- The Beacon Chain and the original Ethereum Mainnet have merged to form a single proof-of-stake chain known as The Merge.
- Ethereum used 99.95% less energy after the Merge.
Merging/Integrating with Mainnet
Ethereum Mainnet was protected by proof-of-work from its inception until The Merge. This made it possible for the Ethereum blockchain, with all its transactions, smart contracts, accounts, etc., to be created in July 2015.
Throughout the development of Ethereum, programmers planned for the eventual switch from proof-of-work to proof-of-stake. As a result, the Beacon Chain was established as a second blockchain that operated concurrently with Mainnet on December 1, 2020.
Transactions on the Mainnet were not initially processed by the Beacon Chain. Instead, it was deciding on active validators and their account balances to obtain agreement on its own state. Then, finally, it was time for the Beacon Chain to agree on actual data after lengthy testing.
The Beacon Chain took over as the consensus engine for the whole network's data after The Merge, including execution layer transactions and account balances.
The Beacon Chain was formally used as the basis for block production after the Merge. Blocks can no longer be created validly by mining. Instead, the proof-of-stake validators have taken on this function and are now in charge of processing all transactions for validity and submitting blocks.
The Merge did not erase any history. The complete transactional history of Ethereum was integrated when Mainnet and the Beacon Chain converged.
What happened to "Eth2"?
The phrase "Eth2" has been phased out. There is just Ethereum now that "Eth1" and "Eth2" have been combined into a single chain, eliminating the need to distinguish between the two Ethereum networks.
The community has changed these terminologies to avoid ambiguity:
The "execution layer," currently called "Eth1," is in charge of transactions and execution.
The "consensus layer," which manages proof-of-stake consensus, is now called "Eth2."
These terminological changes solely affect naming standards; they have no impact on Ethereum's objectives or development timeline.
What does the future look like for Ethereum?
What happens now that EthereumETH 0.0% has committed to a new consensus algorithm, cutting its energy consumption by 99.9% overnight?
The most challenging element of moving to Ethereum 2.0, a multi-phase upgrade path for the smart contract blockchain that debuted in 2015, was switching from the power-hungry Proof of Work.
Ethereum PoS is not the ultimate version, though. Many additional features have been proposed for the global computer network, which, like any piece of software, is never completely finished. So, although there are many things Ethereum developers would like to improve, getting them to agree on which changes should be included with the upcoming Shanghai update is no easy task.
The top item on the list is the capacity to withdraw staked ether, the ETH deposits used to bind validators to respect the network's rules. Beyond that, though, little is definite. Developers need to exercise caution when making changes to the Ethereum Virtual Machine (EVM), a crucial component of the network's infrastructure. A release date may be delayed by months or even years if more testing becomes necessary as new features are introduced. Many network users don't want to wait so long to get capabilities that have been discussed for years.
Could Ethereum Save Crypto?
From a technical perspective, The Merge—the update Ethereum made to proof-of-stake consensus—went smoothly and without any significant issues. The status of the markets is one issue that its upgrade on September 15 was unable to resolve. Despite all the hoopla, the Merge failed to reverse a 10-month economic downturn, and the future for crypto assets is still bleak. ETH has decreased by 20% during the past week.
Given that the principle of "buy the rumour, sell the news" has become a self-fulfilling prophesy at this point, a price fall around the time of a significant event like the Merge is all but inevitable, according to Vid Gradiar, CEO of NewsCrypto.io.
Despite the shorter timeframe price movement, he is still bullish, saying that "over the long term, there can be little question that the net consequence will be outperformance for ETH."
Holders are selling their airdropped coins in large quantities, making ETHW, the native asset of the Proof of Work chain that split apart from Ethereum at the Merge, perform even worse. As a result, despite the coin being listed on significant exchanges, the miner-controlled ETHPoW network has substantially declined over the past week.
Scaling Is Not a Sprint; It Is a Marathon
No noticeable gains for end users were made due to the Merge; for example, Ethereum's network fees and speed are unaltered. However, future updates will fix it, starting with Shanghai.
According to many experts and Blockchain Analysts, "The Ethereum Shanghai upgrade will be the next crucial update after the Merge, adding a withdrawal feature for staked ETH since stakes currently cannot withdraw rewards and funds from their validator balance. In addition, the Shanghai upgrade, which is now in the planning phase, will involve changes in the blockchain's EVM functionalities.
Even after the Merge, according to Vitalik Buterin's prediction from back in July, Ethereum will still only be roughly 55% complete. Therefore, the so-called "Surge" will be the next significant upgrade to improve the network's scalability, speed, and capacity by adding Sharding and layer-2 rollups, looking to additional critical development milestones in Ethereum's roadmap.
What is Sharding?
Ethereum has long been dogged by the idea of Sharding, which allows a blockchain to process transactions in parallel for increased performance. However, most scaling enhancements have been developed on blockchains close to Ethereum, such as PolygonMATIC 0.0% and Arbitrum.
According to AllianceBlock's Matthijs de Vries, "Sharding will increase the Ethereum chain's scalability and efficiency, which will speed up transactions, lower gas costs, and better prepare the network to handle new use cases. And this is great because Ethereum saw many developers switch to other chains. As a result, sharding may ensure ETH's long-term viability and, more importantly, encourage developers to return to the original EVM chain.
Ethereum's inviolability cannot be compromised since it serves as the primary channel for the sector's billions of dollars worth of financial transactions. However, due to the havoc that a significant defect would bring to the de facto smart contract chain of the globe, changes must be carefully planned. Nevertheless, despite empirically taking longer than anticipated, Ethereum's Shanghai upgrade is hoped to be implemented over the next 12 months.
Final Thoughts...
According to Valmont, the Merge upgrade was as tricky as swapping passengers between two planes during a flight. But, "I feel the most challenging aspect is already behind us," he adds. I think the delays leading up to the Merge were evidence of the work done to guarantee maximum network stability and no downtime during the Merge, and the results were successful.
