Since its inception, Ethereum is considered as an important computing platform in the crypto blockchain network. It is a decentralized platform that allows a number of projects to be built on the blockchain simultaneously. Though a number of advancements happened in the Ethereum network, but it still lacks scalability. The present architecture of the Ethereum blockchain is not able to scale the operations to meet the demand globally.
Therefore, the developers are looking forward to the updated versions of the Ethereum blockchain. The Verge, the Merge, the Splurge, the Surge, the Purge and the Beacon Chain are some of the updated versions of Ethereum blockchain network. In this article, we will discuss in detail the Merge Ethereum upgrade and its impacts and benefits on the Ethereum blockchain.
Why There Is a Need to Upgrade Ethereum?
Bitcoin Revolution is a crypto trading tool for investing in the crypto market with an %88 average win rate on trades and is the #1 trading software for crypto traders from all around the globe in 2022. Try it For FREE Today.
As we already know that usually the blockchains are decentralized networks that are not controlled by any single entity. This provides the users an opportunity to carry out their transactions in a secured and permissionless manner. With the increasing popularity of the blockchains, the platforms are struggling to meet the scalability demands of the public. This means the platforms need to increase the speed required for processing of a transaction.
The slower speeds of the transactions carried out simultaneously over the blockchain, results in the blockage of the network. When there are a lot of transactions pending on the blockchain, it increases the time taken for each transaction. Ultimately the customer has to pay a higher fee for carrying out a transaction as a result.
By keeping the decentralized nature of a platform intact, achieving the scalability can be a challenging task for any platform. This concept is also known as “Scalability Trilemma” in crypto domain. Vitalik Buterin proposed this idea that explained that it is difficult to balance the three important attributes over a blockchain. These attributes are decentralization, security and scalability.
As the existing Ethereum network operates on the Proof of Work protocol as its consensus mechanism. There are a lot of difficulties faced if one tries to scale a Proof of work blockchain. First of all, there is a certain limit for the number of validations of transactions that could be done by a block. Then, there is a constant need of mining that has to be done to the blocks.
This can be understood, as the block are required to mined after almost every 10 minutes in the bitcoin infrastructure. Though the mining in bitcoin is safe and protected, still dealing with the mining issues, the higher number of transactions occurring simultaneously, and the limit imposed on the block leads to the blockage of the network. Therefore, more time is taken by a single transaction and also increases the charges of each transaction.
Therefore, the team of the Ethereum platform struggled hard and tried to overcome the limitations of the Proof of work consensus. This led to the discovery of an upgraded form of Ethereum called as the Ethereum 2.0.
Is Proof of Stake Better Than Proof of Work Protocol?
According to the experts, using the Proof of Stake protocol improves the network a lot better as Proof of stake will decrease the consumption of Ethereum by almost 99%. Proof of Work only suits those developers who can afford expensive mining equipment. On the other hand, Proof of Stake facilitates the ones that can stake the crypto assets making it difficult for the external entities to attack.
However, some are of the view that Proof of stake hands over the control to a central authority making it easier for the scammers to attack by getting the control over it.
The Upgrades in Ethereum
As already mentioned, to overcome the problem of scalability in Ethereum and to integrate the other attributes such as security and decentralization in the Ethereum blockchain, the network was upgraded. The Beacon Chain has already been implemented in the blockchain, while the others The Merge, The Surge, The Verge, The Splurge and The Purge are arriving soon over the network. Here are some of the added qualities in the Ethereum blockchain network after upgradation.
- The Beacon Chain
The Beacon Chain is the first ever upgradation in the Ethereum network series. It is called as the phase 0. It added the Proof of Stake protocol in the Ethereum blockchain when it was founded two years ago. The Beacon Chain operates in parallel to the Ethereum mainnet at present. There are two ways of interaction provided by the Beacon Chain for the users. One of them is staking the Ethereum and the other one is securing the network by running a consensus client.
- The Merge
To cater the scalability issues effectively, Ethereum is striving hard to bring on another upgraded version called as the Merge. As the name indicates, it integrates and merges the two protocols that are currently operating independently on the Ethereum blockchain. They are the consensus layer (the Beacon Chain) and the execution layer.
By the end of this year, it is expected that the Beacon Chain that introduced the Proof of Stake mechanism in the Ethereum ecosystem will merge with the Ethereum mainnet. As a result, the Ethereum blockchain will secure the transactions by using the Proof of Stake protocol only.
- The Surge
This upgrade in the Ethereum blockchain will introduce the sharding in the network. It is considered a scaling solution that will convert the network into smaller portions. These parts are known as shards. This will facilitate in the better processing of blockchain data by dividing the transaction load over the mainnet.
- The Verge
This is the upgrade in the Ethereum blockchain that will introduce the Verkle trees in the network. It will increase the capacity to store data on the Ethereum nodes. This upgrade is meant to update the present Merkle proofs.
- The Purge
This update in the Ethereum blockchain will help in reducing the network congestion due to transaction load. It also relates to the reduction of space available for the validators on the hard drive by increasing the data storing capacity for the validators.
- The Splurge
This will be last upgrade to happen to the Ethereum blockchain. It will also add up to the increasing betterment of the blockchain network by making the network run smoothly overall.
- Consensus Mechanism
As soon as the Merge will happen, the Proof of Stake protocol will replace the Proof of Work mechanism. This will result in the minting of the block or forging by the nodes known as validators instead of mining them. The block is validated periodically by the node that is appointed randomly. In return, the validators get the rewards from staking and the tip from transaction fee as reward.
Apparently, there is no competition among the nodes, therefore the proof of stake protocol is considered more sustainable than proof of work as it requires lesser resources.
- The Mainnet Transactions
At present, there are very less transactions processed by the Beacon Chain. However, after the Merge occurs, the core of the transactions will be Beacon Chain.
After the Merge, the transaction history of the Ethereum and the Beacon Chain will integrate together. But this has nothing to do with the Ethereum currency. It has no role play in the upgradation of the Ethereum platform. The Ethereum tokens can be used as it they are used today after the Merge too.
Preparations Required for The Merge
Merge is considered to be a big step in changing the entire Ethereum blockchain network. However, it is important for the users to know that the upgrade requires no changes or alterations in the present wallets of the users and holders. They can get hold of all their assets easily even after the Merge too.
- Staking the Node Operators and Providers
Before staking a node, the user should take some important steps. First of all, develop an integration connection between the execution layer and the consensus layer. The user ahs to make sure that both of these layers are working in connection with one another, and they share a common JWT code that is not known by anyone. This helps in better communication between the two layers.
The users are advised to provide an address so that they can receive the tips on every transaction occurring as a reward.
- Non-Validating Node Operators
The user should deploy the execution layer separately from the consensus layer. Again, it is to be made sure that they both are communicating effectively with each other, and they share a JWT code that nobody else knows.
- DApp Developers and Smart Contracts
After the Merge, the developers are expecting drastic changes in the Ethereum blockchain network. They are looking forward to the effects of the increased scalability on the smart contracts and the decentralized apps.
What Will Happen to Price of Ethereum Post-Merge?
Keeping in mind the volatility of the crypto market, the experts are of the opinion that it can happen in both ways. May be the price of Ethereum may hike after the addition of Merge in the blockchain network or they can also decrease the other way round. It is difficult to say anything beforehand even after keeping in view the monetary policy of keeping the prices intact and the activity of developers over the blockchain.
It is predicted that the issuance of Ethereum will decrease by almost 90% but then it is difficult to predict the effect on the price of Ethereum. What if by using the Ethereum mainnet, the miners still to keep the proof of work protocol intact? It is difficult to give a proper opinion before time.
The Impacts of Merge
Merge being a latest update in the Ethereum blockchain has caused a number of impacts on the blockchain as well other platforms too. The impacts of Merge are mentioned below.
- On Ether
Merge is considered one of the most advanced upgrades of Ethereum, and with it, Ethereum has also launched millions of Ether tokens. Operating under the Proof of work protocol, these tokens are initially used to pay the incentives to the miners to build their confidence and keep the system running.
However, when the protocol will be shifted to Proof of Stake, there will be no need to pay the miners. This will result in the annual issuance of Ethereum by almost 90%. It is also possible that consequently the price of ether also increases due to the application of law of demand and supply. But one cannot predict anything before hand as the crypto markets are totally unpredictable and volatile.
- On BETH
When Ether exists in token form on the Binance platform, it is termed as BETH. After the Merge, there will be no rewards offered to the miners. Rather the transaction fee tips, and the staking rewards will be given to the validators at nodes. Moreover, the Maximum Extractable Value (MEV) rewards will also be given to the validators after Merge happens. In case, this practice is adopted by BETH, the Annual Percentage Rate (APR) will significantly also increase.
- On Binance Users and Products
The ones who use the Binance products and the ETH tokens will not be affected by the Merge as Binance will be not much affected by it. ETH will only be removed from the mining list and temporary pause will be imposed on the depositing, withdrawal and borrowing of the ETH.
Some common Misconception Related to Merge
Merge is considered as an important event in the Ethereum blockchain. There are some common misconceptions that are being related with the introduction of Merge. Some of them are mentioned below.
- It will cause reduction in gas fee
Though Merge will increase the data processing, but it will not increase the overall data capacity of the blockchain. However, there are some scaling solutions available that can do so.
- It will need to stake 32 ETH for operating a node
The Ethereum blockchain owns two kinds of nodes. One that are able to propose blocks and one that are not. The nodes that do not propose blocks are also a part of the security procedure of the network.
- Transaction speed will expedite greatly
Though the increase in scalability is said to improve the transaction speed after the Merge. However, the speed of the transaction on the mainnet are predicted to stay the same almost.
- It will cause an overall network downtime
After the Merge, it is expected to have a zero downtime. But the overall network should operate in the same way as it is working now.
- After Merge all the staked ETH will be withdrawn
It is not possible for all the validators to leave the network at the same time. This is because of the security issues. There is a limit set on the exiting of the Ethereum in a day. According to that limit, almost 43,000 ETH can leave the network in a day. However, the number of ETH staked is comparatively very higher than this.
Are There any Chances of Failure of The Merge?
Though there are very less chances of it Merge to fail, but yes it can happen. The shifting of the Ethereum blockchain network from proof of work protocol to the Proof of Stake protocol is one of its kind in the history of crypto. This experiment involves a higher risk, and all eyes are awaiting the results. In case, it is successful, it will create a new benchmark for the developers and the users.
But the failure may result in loss of millions of dollars being invested. Though the developers are carrying out multiple tests before implementing it completely, though unlikely but still there is a little chance of failure of the Merge.
What is Ethereum’s Roadmap Beyond Merge?
Ethereum has not announced about the other updates in the network. Sharding, The Verge, The Splurge, The Purge and The Surge stand next in the queue after the Merge. All these upgrades will be happening by the next year most probably.
Sharding in the Ethereum blockchain network will help in reducing the transaction fee and the time required for carrying out transactions. It will also do so by increasing the scalability of the network. There are shard chains in sharding that resemble the traditional blockchains. The only difference lies that they hold a specific amount of data that will facilitate the nodes to verify the transactions more effectively.
However, there is a lot of energy and time investment required to implement sharding as a scaling solution. But in case it is achieved, it will be considered as a great success in the Ethereum blockchain network. The data on the blockchain could be stored and processed in a better way after that.
Everyone is looking forward to one of the most important upgrades in the Ethereum blockchain, the Merge. It will help to increase the scalability of the blockchain by implementation of advanced scaling solutions. All the planned upgrades in the Ethereum blockchain will help to increase the scalability, thus making it possible for the blockchain network to process and secure the data transactions in a better way by keeping the decentralization intact.
Best Forex World is not responsible for the content, accuracy, quality, advertising, products or any other content posted on the site. Some of the content on this site (not all) is paid content that is not written by our authors and the views expressed do not reflect the views of this website. Any disputes you may have with brands or companies mentioned in our content will need to be taken care of directly with the specific brands and companies. The responsibility of our readers who may click links in our content and ultimately sign up for that product or service is their own. Cryptocurrencies, NFTs and Crypto Tokens are all a high-risk asset, investing in them can lead to losses. Readers should do their own research before taking any action.