The Ethereum Merge Has Come and Gone. What Now?

Years of hard work in the Ethereum Foundation finally paid off when the system-wide upgrade to the Ethereum blockchain, one of the most important breakthroughs in the history of the cryptocurrency industry, officially happened on September 15, 2022. The crypto-verse has been familiarising itself with the term "Ethereum Merge" for almost a year with various upgrades. However, many people are still uncertain about the details, which is entirely expected given the freshness of the event. So in this article, we've covered everything you need to know about the Merge and its impact on the cryptocurrency world.

First, what is Ethereum?

Ethereum was founded in 2015 by Vitalik Buterin, a Russian-American 19-year-old, in an attempt to transcend the limits of Bitcoin, the original cryptocurrency. His idea for Ethereum was an automated system, later known as "smart contracts," that adhered to established rules and eventualities to perform several activities. The native digital currency of Ethereum is called Ether (ETH).

A built-in blockchain-based programming language is included in the Ethereum platform, used to develop decentralized apps (dApps). Blockchain technology enables these to operate without the risk of failure, corruption, central authority, or outside influence. Smaller dApps may also be combined to create larger dApps. 

Now, what is Ethereum Merge?

The "Ethereum Merge" marks the moment when Ethereum officially moved from the Proof-of-Work (PoW) authentication protocol to the Proof-of-Stake (PoS) authentication protocol by combining its original execution layer (the Mainnet) with the PoS consensus layer, the Beacon chain. 

When a Total Terminal Difficulty (TTD) value indicating the total difficulty of all blocks ever mined using the network's PoW algorithm reached following the Bellatrix update on September 6, the Proof-of-Work chain finally switched to Proof-of-Stake on the Merge day. A Beacon Chain validator started building the subsequent block right after the execution layer reached or surpassed the TTD. The Merge transfer was considered complete only when the Beacon Chain completed this block.

Proof-of-Work Vs. Proof-of-Stake 

Before the Merge, Ethereum was using Proof-of-Work (PoW) consensus mechanism like every other crypto where a small group of users (miners) authenticate transactions, by competing against one another to solve challenging mathematical problems, in exchange for network rewards. This verification method has been subjected to extensive criticism over the years due to its high energy consumption.

The new Ethereum uses a Proof-of-Stake consensus mechanism that replaces miners with randomly chosen network members, called "validators", and places decision-making authority in their hands. Instead of solving complex Math challenges, these members choose the blocks they decide to be legitimate and stake their cryptos as collateral against them. Validators in this system are penalized for being inactive or attesting incorrectly. They also risk losing everything if they attempt to hack or overpower the network, encouraging people to participate actively and ethically in safeguarding the network without utilizing much energy.

The advantages of Proof-of-Stake:

The Ethereum Foundation claims that PoS provides several advantages over PoW, like -

Low energy consumption:

Unlike PoW, specialized and costly gear is not required in PoS because receiving rewards isn't dependent on having the maximum processing power. According to the developers of Ethereum, PoS has reduced energy usage for Ethereum almost by 99.95%. The Ethereum website compared their estimated overall energy usage post-Merge :

According to Ethereum, "People consumed 45 times more energy watching Gangnam Style in 2019 than Proof-of-Stake Ethereum uses in a year."

More participants and increased decentralization:

This Merge enables more people to run an Ethereum node since it's not demanding in terms of either finances or knowledge to become a validator, allowing for greater decentralization.

Higher resistance to 51% attack:

This Merge will also create a much higher resilience against 51% attacks since this kind of attack will be costly in the new system owing to the economic penalties for nefarious activities. If 51% of the attacks succeed and the crypto-economic protections breach, the PoS mechanism would allow the community to turn to social recovery and restore an honest chain.

So now that the Merge has already happened, what is the future we're looking at?

With the extensive upsides of the Proof-of-Stake mechanism, the future of Ethereum and the world of blockchain holds several positive outcomes, some of which we're discussing below:

A greener future:

Since most blockchain applications worldwide are developed on the Ethereum platform, energy consumption has decreased for all of them. The world is moving towards a blockchain future in the wake of the Metaverse, creating the opportunity for a greener and more sustainable future. 

A sizable, expanding, and vibrant Regenerative Finance (ReFi) ecosystem is being built on the Ethereum platform. DeFi (Decentralised Finance) components are being used in ReFi applications to create financial applications with more favorable environmental aspects.

A more investor-friendly Ethereum network:

Even though the initial reaction to the Merge has not been entirely positive on the investors, with a decline of 7% in Ethereum prices, there is no need to be startled as of yet since the Ethereum Foundation claims to have plans of getting it all sorted soon. 

As stated earlier, the switch to PoS consensus allows more people to participate in the network because of the more ethical work and the lower expenditure overall. Digital assets, especially crypto, rely heavily on institutional money. Ethereum Merge makes things easier for investors. It may eventually nail down Ethereum as the "premier blockchain network" and put it above every other blockchain platform, perhaps even more than it has already done because of Ethereum's extra perks. 

Faster, cheaper, and more scalable Ethereum:

The Surge, which comes after the Merge, intends to increase Ethereum's throughput capacity using sharding, a layer-1 scaling solution that breaks down validation work into smaller amounts. Buterin claimed it could make Ethereum's transaction-per-second rate 100 times quicker, allowing for greater network throughput. Sharding might be able to address some of the layer-2 (L2) blockchain's core problems. The reduced strain on the layer-1 blockchain will aid in processing information more quickly and boost scalability. The focus on layer two will also reduce the gas fees required to run Ethereum and lower transaction costs.

In Conclusion,

Like everything nascent in the world, the new system of Ethereum has a few downsides, too, which are yet to be taken care of. Ethereum is also the first ever to implement PoS consensus at such a large scale, so there will be a few issues that will only be solved by trial and error over time. The promised advantages are reportedly going to take some time to emerge. Nevertheless, to see the big picture, the Ethereum Merge is quite a positive move despite people's various fears that originated from the lack of available data. Given the vast advantage PoS brings to the table, experts assure it will eventually create a bright future for the whole world.