In short, The Merge is the joining of the original execution layer of Ethereum, also called the Mainnet, with its new proof-of-stake consensus layer, the Beacon Chain. It eliminates the need for energy-intensive mining and instead allows the network to be secured using staked ETH. The move is a first step in realising the Ethereum vision, as the creators see it, bringing more scalability, security, and sustainability.
In practice, this means that the blockchain will move from a PoW (proof-of-work) consensus mechanism to a PoS (proof-of-stake) one. Proof-of-stake is a different kind of cryptocurrency consensus mechanism for processing transactions and creating new blocks in a blockchain. PoS implies that crypto owners offer their coins as collateral for the chance to validate blocks. Coin owners with staked coins become validators, who are then selected randomly to validate (instead of mine) the block. This system randomizes who gets to validate rather than using a competition-based mechanism like proof-of-work.
The main advantage of PoS is that miners do not need to invest colossal amounts of money in powerful and energy-consuming hardware. In fact, according to Catherine Mulligan, a professor of computer science at the University of Lisbon’s Instituto Superior Técnico as cited by Business Insider, PoS was developed ‘in response to the high computational costs of proof of work protocols’.
Of course, such a colossal move cannot be implemented with the switch of a button, so that is why a merge of the old platform and the new one was needed. Information was thus allowed to pass on the newly formed ‘bridge’. This explains how a blockchain can merge with itself.
To get a better understanding of the process we need to travel back in time, when Ethereum was just another usual blockchain. The Ethereum network began by using a consensus mechanism that involved PoW. This allowed the nodes of the network to agree on the state of all information recorded on the Ethereum blockchain and prevented certain kinds of economic attacks.
The Nakamoto consensus, which utilises proof-of-work, is the mechanism that once allowed the decentralised Ethereum network to come to consensus (to allow all nodes to agree) on things like account balances and the order of transactions. This prevented users from ‘double spending’ their coins and ensured that the Ethereum chain was difficult to attack or manipulate.
The disadvantage of the PoW consensus? It defines an honest node as a node that seeks out the longest valid chain of blocks and applies proof of work to extend that chain. This means that it looks for the most work done to validate an action, which is great from a theoretical point of view. However, when looking at the resources needed to perform validations, the requirements grow over time.
And that has become clearer recently, as cryptocurrencies have been getting more and more popular. In some cases, crypto mining had to be stopped to prevent power outages or to alleviate the pressure on the power grid.
Source: https://ethereum.org/en/energy-consumption/
As statistics show, the power usage for the most popular cryptos is reaching enormous levels, with Bitcoin almost matching the gold mining industry and YouTube when it came to energy consumption. While that might still be the case for Bitcoin, Ethereum decided this paradigm is no longer feasible for their vision and moved to adopt the PoS consensus mechanism, reducing their annual power usage from 112 terawatts to 0.01. As they said in their announcement, the power consumption was thus reduced by 99.95%.
As mentioned on their official website, since its inception, Ethereum aimed to implement a proof-of-stake consensus mechanism. However, achieving this without sacrificing security and decentralisation took years of research and development. Therefore, a proof-of-work mechanism was used to get the network started.
When the technology was finally ready, Ethereum launched a separate proof-of-stake Beacon Chain on 1 December 2020. Miners could still do their job, but validators, those using proof-of-stake consensus, would be able to create as well. The new PoS chain ran in parallel with the old PoW Ethereum blockchain. On 6 September 2022, the Ethereum community released the Bellatrix upgrade to start The Merge process.
With this first upgrade, the community decided to swap the proof-of-work chain with this proof-of-stake chain upon hitting a pre-set Total Terminal Difficulty (TTD) value on the original Ethereum blockchain. That specific event happened on 15 September at 06:42 AM UTC, completing The Merge.
But what happens to all those miners that previously put so much effort, time, and money into their activity? They either adapt to the new system or rebel against it. When such a rebellion happens, crypto enthusiasts talk about a ‘fork’.
In Ethereum’s case, groups of miners with massive computing power were unwilling to leave the good old mining behind and created their own proof-of-work blockchain, based on Ethereum. Following The Merge, several forks appeared, including the popular ETHPoW. The forks benefited from a massive increase of computing power after the event on 15 September, as miners had to move away from the main PoS Ethereum network to alternative PoW ones.
The enthusiasm was not to last for some of the forks, as the most popular of them, the ETHPoW, was hit by an exploit. The attacker was able to get away with 200 ETHW tokens, raising questions about the security of these new forks.
The next of these steps, The Surge, will mean the addition of Ethereum sharding, a scaling solution that the community claims will further enable cheap layer-2 blockchains, lower the cost of rollups or bundled transactions, and make it easier for users to operate nodes that secure the Ethereum network. Buterin also said that once the surge is complete, the Ethereum network will also process transactions faster.
The Verge will implement what Buterin calls ‘Verkle trees’, a type of mathematical proof, and ‘stateless clients.’ These upgrades will allow users to become network validators without having to store extensive amounts of data on their machines. This would be great for decentralisation and could also imply less power usage.
The Purge is simpler to understand, and it will imply a cleaning of old network history. The Splurge has been left as the last step and it does not relate to any precise plan. But, as the name suggests, it could mean a period of prosperity for the blockchain and its community.
On 8 September 2022, the White House Office of Science and Technology Policy issued a report, calling for significant energy data disclosures to various federal agencies, including the Energy Information Administration. The crypto-asset industry and the energy industry that supports it should be prepared to provide these disclosures soon.
The report also makes clear that mining operations on crypto-asset networks using the energy-intensive proof-of-work protocol will likely face marked scrutiny and pressure from the federal government to reduce their impacts. Essentially, it recommends that the federal government push the crypto-asset industry to pursue carbon-free energy sources and to strive for a power consumption as low as possible.
Ethereum seems to have moved ahead of the curve, anticipating that an almost infinitely-scaling mechanism will also imply almost infinite energy consumption. The eco-friendly crypto enthusiasts can smile knowing that the future can get better.
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