Ethereum 2.0: Here is Everything you need to know about The Merge

Ethereum is the world’s largest blockchain network after Bitcoin. The network aims to create a safe, open and decentralized environment for seamless development of Defi and dApps.

However, the over use of Ethereum has made the network congested requiring higher gas fees and loaded with scalability and security issues.

Get ready to Welcome Ethereum 2.0. 

Ethereum 2.0 is an upgrade to the Ethereum network that aims to resolve the existing issues of the blockchain. With major framework changes and developments, Ethereum 2.0 will ensure scalability, security and efficiency. The most notable upgrade is the switch from Proof of Work (PoW) to Proof of Stake (PoS).

Today we are here with a complete roadmap to help you understand the Ethereum 2.0 Merge. 

What is Ethereum 2.0?

Ethereum 2.0 is a multi-phase upgrade to the Ethereum network. 

The upgrade aims to enhance the speed of the network while ensuring its scalability and efficiency. It is to avoid the flaws in the network and ensure that the transactions are processed quickly. 

Currently, the Ethereum network uses the Proof of Work consensus mechanism. But after the Merge, the miners will produce Ethereum blocks through Beacon Chain following the Proof of Stake mechanism.

In the initial levels of the transition, Ethereum will merge with Beacon Chain and make a complete switch from PoW to PoS. The final levels of the upgrade will include additional updates like Sharding.

Ethereum 2.0 is also called “Serenity” or ETH2. However, developers have dropped this term. 

In January 2022, the Ethereum Foundation said that it will not refer to the upgrade as Ethereum 2.0. According to them, the existing Ethereum is the “execution layer” containing the smart contracts and network rules. While the ETH2 will be the “consensus layer”. 

Both the execution and consensus layer will collectively form the Ethereum blockchain network.

However, we are stuck with the name Ethereum 2.0 forever.

Key features of Ethereum 2.0

Efficiency

After the shift to PoS consensus Ethereum will become 99.95% more energy efficient.

Sharding

Sharding will spilt Ethereum into parallel chains which will increase efficiency and network speed.

Staking

Ethereum mining will stop forever. After the Merge, Ethereum will follow the staking mechanism to validate the transactions.

Security

The upgrade will enhance the security of the network. 51% of the attackers will be easily identified with a validator address. They will be forked away in case of any attack.

When Will Ethereum 2.0 Happen?

According to Ethereum Foundation, the full upgrade to Ethereum 2.0 will complete by 2023. 

The Ethereum 2.0 upgrade is a multi-stage process. With each successful upgrade, Ethereum advances into its next phase. 

On 1st December 2020, the Beacon Chain went live. It introduced native staking in the Ethereum network. It is a key player in the network’s transition to the Proof of Stake mechanism. It is a separate or you can say distinct blockchain from the Ethereum mainnet.

The second phase “The Merge” is expected to commence in the second quarter of 2022. According to some reports, it will start somewhere in September 2022. In the second phase, developers are looking to merge the Beacon Chain with the Ethereum mainnet.

Kiln testnet merge was successful this year. It was the last public testnet before the final shift to the Proof of Stake consensus mechanism.

In the final phase Sharding is a key player to improve the scalability of the network. Sharding chains will spread the operations across 64 chains for speedy processing. Currently, all the operations are processed over a single chain which leads to delays.

The sharding stage is the most crucial part of the upgrade. It is the development phase that will redefine the efficiency and scalability of the Ethereum 2.0 network.

Ethereum’s Shift To Proof Of Stake Explained

Ethereum network aims to provide an open network for developers to build dApps. With such a network, you need a decentralized way of validating transactions. 

Ethereum like Bitcoin uses Proof of Work consensus to validate transactions on its network. 

But what do you mean by Proof of Work consensus?

You can understand Proof of Work consensus as the competition where the miners are competing with each other to solve complex mathematical problems. They use high computing power to solve these math problems. The first one to solve the puzzle gets the right to validate and create blocks. 

The miners are rewarded with the native cryptocurrency of the network. In the case of Bictoin mining you will get, BTC while in Ethereum, you receive ETH.

But PoW consensus uses high energy which impacts our environment. By shifting to PoS consensus, Ethereum will see a 99.95% reduction in energy usage. It will make the network energy efficient, promoting green cryptocurrency and blockchain.

Let us now understand how the Ethereum PoS mechanism will work.

After the switch to PoS, the Beacon Chain will select a group of validators every 12 seconds. The size of the group will be 1/32nd of all the stakers on the network. 

In the group, one validator will be the block proposer and others will be the attesters. The attesters will attest to the validity of the block once the block proposer proposes a block. 

For every new block, a new block proposer will be appointed. If any block proposer is found to be involved in suspicious activity, he will have to pay the penalty. It is also called “slashing.

The stakers will get all block rewards and transaction fees as rewards. The reward will be distributed equally among the pool of stakers. The best thing is that all the people who will stake their ETH will receive rewards. It does not matter if you were in the selected group or not.

Joe Lubin at Camp Etheral in March 2022, said that the upgrade will “lay to rest proof-of-work, will lay to rest Ethereum’s carbon or energy footprint problem.”

Will Ethereum 2.0 Have Better Scalability Than Ethereum?

Currently, the Ethereum network can process only 30 transactions per second. It is because the current set up has a single chain with consecutive blocks. All the operations are processed on a single chain which is slow and inefficient. 

The Shard chains will improve the speed, scalability and efficiency of the network. It will split the blockchain into 64 parallel chains. Now, the operations will be carried out on parallel chains instead of a single chain. It will speed up the entire processing of the blockchain network.  

Ethereum 2.0 envisions processing 100,000 transactions per second. 

3 Phases of Ethereum 2.0 Development

Let us now understand the 3 phases of Ethereum 2.0 development.

Ethereum 2.0 will be launched in 3 phases:
  • Phase 0- Beacon Chain
  • Phase 1- The Merge
  • Phase 2- Sharding

Phase 0: Beacon Chain

Beacon chain was officially launched on 1st December 2020. This phase introduced Proof of Stake to the Ethereum ecosystem. It serves as the consensus layer to the existing Ethereum network which acts as the execution layer. 

As the first upgrade phase, the Beacon chain laid the foundation for the upcoming updates.

Phase 1: The Merge

The Beacon chain upgrade was successful. It is already live and exists as a separate chain from the Ethereum mainnet. 

The next step is the Merge. In this step, the Proof of Work consensus on the execution layer will be replaced by the Proof of Stake protocol on the Beacon chain.

You can also understand it as the merge of the new consensus layer with the existing execution layer. Hence the phase is called The Merge.

On successful completion of this stage, Ethereum mining will stop and Ethereum staking will start. 

The Merge is a key step in the upgrade. It will play a key role in making Ethereum energy efficient and significantly reducing its carbon footprint. Moreover, it will also set the stage for future upgrades like Sharding.

The developers have set the timeline of the Merge in September 2022.

Phase 2: Sharding

After the Beacon chain has been successfully merged with Ethereum mainnet, the next step is Sharding. As discussed above, sharding will play a major role in enhancing the scalability of the network. 

Sharding will split the blockchain horizontally into parallel chains to share the network’s load. It will work with layer 2 roll ups to distribute the burden of handling large amounts of data. 

Decentralized applications (dApps) can “roll up” transactions into one off-chain for submission using the layer 2 solutions. It will lower the amount of data required to complete a transaction.

After the Merge, layer 2 rollups and sharding work together to enable a transaction speed of 100,000 tps.

With Sharding:

  • Validators will no longer need to store all the data themselves. Thus reducing the cost of data storage and hardware equipment.
  • Now, you will be able to run Ethereum on a laptop or mobile phone. It will increase network participation, enhance security and bring greater decentralization.

Ethereum 2.0 Progress So Far

There have been 3 upgrades since the Beacon Chain was launched in December 2020. 

Let us have a look at each one of them in detail.

Berlin upgrade

On April 15, 2021, the Berlin upgrade went live. It reduced gas costs for some EVM (Ethereum Virtual Machine) operations. Additionally, the patch improved support for many transaction types.

London upgrade

The transaction fee market for the ETH 1.0 chain was significantly reformed by the London upgrade. It was introduced on August 5th, 2021, via EIP-1559. Additionally, it eliminated or decreased gas fees for certain functions.

Altair upgrade

Altair upgrade was released on October 27, 2021. It includes support for “sync committees,” which enable light clients, brings validator inactivity, and reduce penalties up to their maximum values.

Göerli Final Testnet Merger

On 11th August 2022, Goerli Final Testnet went live. It is the third and final testnet before the Merge scheduled in September 2022.

The Göerli merger necessitates that node operator simultaneously update their consensus and execution layers. It is the final testnet merger of Ethereum with the Beacon chain.

The merger will impact only the node operators and testnet participants. Those who have staked their ETH will not be affected.

Before the Goerli testnet, Ropsten and Sepolia testnet were also successful which build the confidence of the Ethereum community. 

Understanding Serge, Verge, Purge and Splurge

After the successful Merge, Ethereum will have three additional upgrades. They are:

surge

purge

splurge

Surge 

The surge in Ethereum 2.0 development refers to Ethereum Sharding which will enable the network to process transactions faster. It will ensure affordable layer-2 roll ups and reduce the cost of rollups. Thus, the node operators can easily secure the network. 

Verge

Verge will bring “stateless clients” and “Verkle trees”. These are mathematical which enables users to become network validators without having to store huge data on their machines.

Purge

Purge in the development phase will clean the network history. It will significantly reduce the amount of space required to store data on your drive. It will also remove the need for nodes to store historical data.

Splurge

Splurge is the final stage which will include several minor upgrades to refine the network. Vitalik calls it, “all the other fun stuff”.

Conclusion

At the EthCC conference, Vitalik Buterin said that Ethereum is currently 40% completed. The Merge of the Beacon Chain with the Ethereum mainnet in September 2022, will take the stats to 55%.

Indeed Ethereum 2.0 is a major upgrade in the crypto community. It holds the potential to change the crypto market economics forever.

If you are looking to build your own cryptocurrency or get customized blockchain solutions, partner with us. We are a leading blockchain development company offering a wide array of blockchain solutions, Defi development, NFT development, crypto, wallet, Defi and other Web 3.0 services

Talk to our experts today October 5, 2022

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