The Significance of Ethereum Merge and Its Impact on Blockchain Architecture
Ethereum, the world’s second most valuable cryptocurrency, has completed a significant software overhaul that promises to increase the security of the cryptocurrency while also claiming to cut its carbon footprint, almost entirely.
The revamp, known as “The Merge”, will remove the need for crypto miners and giant mining farms, which had previously operated the blockchain under a mechanism called “proof-of-work” (PoW). Instead, it has now moved to a “proof-of-stake” (PoS) mechanism that randomly assigns “validators” to approve transactions and earn a small reward.
The move to PoS will reduce ethereum’s energy consumption by nearly 99.95 percent, according to the Ethereum Foundation, a non-profit organization dedicated to supporting the cryptocurrency and its related technologies.
What has really changed?
Ethereum is a decentralized cryptocurrency, which means that it does not have institutions such as banks that approve the transactions that happen on the network – the approvals previously happened under the PoW consensus mechanism which was mainly done by miners. Miners would compete to solve complex mathematical puzzles using a massive infrastructure of cutting-edge hardware, and the first to solve the puzzle would be chosen as a validator. This method relied almost entirely on cryptofarms, which are huge warehouses lined with rows of computers that would solve the puzzles.
However, there was one big problem – these mining farms were energy guzzlers, leading to one of the biggest criticisms of the crypto industry that they sometimes consumed more electricity than entire countries, and were therefore a major concern in terms of environmental sustainability.
Go to “Merging” and switch to the PoS consensus mechanism. Ethereum is still a decentralized platform, but under the new concept, it would not need miners and mining operations to authenticate transactions anymore. Instead, a validator will be randomly assigned using an algorithm from a group of people who ‘stake’ their coins, which essentially means pledging at least 32 Ethereum tokens on the network. This will completely eliminate the need for miners on the Ethereum network.
Why is “Blend” important?
The development comes amid increasing regulatory scrutiny of cryptocurrencies, which have taken a hit in value since the start of this year. One of the biggest benefits touted with ‘The Merge’ is that it will make transactions on the Ethereum network extremely secure.
Justin Drake, one of Ethereum’s key researchers leading the migration, explained it in Time Magazine as: “The merge dramatically increases the security of Ethereum. An attacker needs 51% of the blockchain’s value to [take control]. With Proof of Work, you need on the order of $5 billion, which allows you to buy enough computers and transformers, connect them all to the grid, and then launch an attack. With Proof of Stake, we will have around $20 billion in financial security today – and this is a number I expect to grow dramatically.”
Apart from that, it is also seen as an environmentally conscious move as Ethereum is now expected to consume 99 percent or so less energy.
Given that some of the most popular applications of cryptocurrencies such as non-fungible tokens (NFT) and decentralized finance (DeFi) are based on the Ethereum network, the overhaul could have far-reaching implications in the future.
What’s Next for Ethereum?
At the Ethereum Community Conference in July, Ethereum co-founder Vitalik Buterin had said that after ‘The Merge’, the network will undergo further upgrades which he called “surge”, “verge”, “purge” and “splurge”.
Wave: This refers to the addition of Ethereum sharding, which promises to process transactions on the network much faster than now. Sharding basically means splitting transactions across several different chains in a way that will reduce fees and speed up transactions. “Eventually, ethereum will be able to process 100,000 transactions per second,” Buterin said at the conference.
Edge: Verge will implement what Buterin called “Verkle trees” and “stateless clients,” which will allow users on the network to become validators without having to store large amounts of data on their machines.
Cleaning: As the name suggests, this step will involve cleaning old network history. “The cleanup: trying to actually cut down the amount of space you have to have on your hard drive, trying to simplify the Ethereum protocol over time and not require nodes to store history,” Buterin said.
Splurge: Buterin called this phase “the fun stuff.” It aims to ensure that the network continues to run smoothly and that the updates to the protocol in the previous sections do not cause any problems.
