The world’s second-biggest cryptocurrency is finally receiving a massive update in August 2022. The “Merge” will migrate Ethereum’s blockchain from the present proof-of-work model to a faster and more energy-efficient proof-of-stake consensus mechanism. But shifting the second-biggest cryptocurrency to a different system is a highly complicated and multi-step process. Therefore, every decision must be thoroughly assessed before it’s executed.
In this blog, you’ll learn about the Merge, its history, and the benefits that Ethereum miners stand to enjoy when the new blockchain is rolled out. You’ll also discover what caused the delays to this upgrade and how successful the initial tests were. Keep reading to find out more.
What is Proof-of-Stake?
Proof-of-work (PoW) requires Ethereum miners, to compete for various rewards depending on the computational power at their disposal. Unlike PoW, the proof-of-stake (PoS) consensus mechanism randomly chooses Ethereum validators based on their staked ETH and the staking time.
PoS validators don’t require Ethereum miners to mine blocks to sustain the blockchain. Instead, these miners have to develop new blocks if selected and validate other blocks when not selected. When a participant validates the most recent block of ETH transactions, other participants confirm whether that block is authentic. The Ethereum blockchain adds a novel block when sufficient confirmations have been made.
Rewards are distributed in ether – the native currency of the network – in proportion to the validators’ stake. The blockchain comes with penalties (slashing) to promote good behaviour. Slashing causes a validator to lose some of their staked ETH if they confirm bad or malicious transactions or go offline for a significant period.
Although becoming an Ethereum validator requires high technical expertise and knowledge, anyone can participate if they meet a minimum requirement of around 32ETH. Staking 32ETH would be no easy feat for many investors. Therefore, investors who fail to meet this threshold may participate by staking ether in a third-party-controlled pool.
Advantages of PoS Over PoW
While proof-of-work is secure and reliable, here are some aspects that make proof-of-stake more beneficial to Ethereum miners and investors:
- It doesn’t require costly and complex software such as mining rigs
- It’s more friendly to the environment – less than 99% of PoW’s energy consumption
- It offers enhanced network security because of its reduced risk of centralization
A Brief History of the Merge
His various writings show that Vitalik Buterin – Ethereum’s co-founder – has been a long-term advocate for the PoS model. PoS is expected to reduce energy consumption by around 99.95% compared to its energy-intensive consensus counterpart.
It’ll also make way for shard chains, which are expected to be launched in 2023. Shard chains will help eliminate data congestion and high gas fees and usher in a new era of layer-2 scaling systems. According to Ethereum Foundation’s upgrade overview, these chains will offer additional, affordable storage layers for rollups and applications to store and manage data.
Unlike traditional companies or ERC standards that initiate regulations from the top-down, any huge changes to the network’s core protocol require a consensus from the international community of nodes. Due to the lengthy process that Ethereum decisions and upgrades undergo, many of its critics have pointed out the frequent delays the upgrade has experienced.
However, these delays happened for a reason. Ethereum carefully and laboriously consolidated the blockchain through incremental, consistent forks and updates across various multiple core elements such as:
- The Merge
- The Beacon Chain
- Shard chains
All these elements depend on the success of each other to achieve Ethereum’s full vision of more security, sustainability, and scalability.
As of this writing, Ethereum has announced the Merge event will take place in August 2022. The Beacon Chain will officially mark the migration to a proof-of-stake consensus mechanism during this period.
Timeline of Ethereum’s Forks and Upgrades
Ethereum’s software updates and forks must undergo thorough testing from core developers and the community to avoid potential vulnerabilities. Here are some of the notable forks and updates that have taken place since the Beacon Chain was announced:
- London hard fork – took place on August 2021
- Altair upgrade – took place on October 2021
- Arrow Glacier – took place on December 2021
- Kiln testnet – took place on March 2022
- Mainnet shadow forks – took place on April 2022