After many assumptions, the Ethereum Merge countdown has finally started. The stakes of the reality of the merge were not even near for most doubters, but the latest outcomes pushed the new improvements in Ethereum’s development. In this article, we’re going to talk about what is the Ethereum Proof-of-Stake Merge, the countdown, and other necessary details.
What is The Ethereum Proof-of-Stake Merge?
The Ethereum Merge signifies the transformation of the consensus mechanism for validating transactions in the Ethereum network from Proof-of-Work to Proof-of-Stake. The Ethereum Blockchain will work quicker and more efficiently after this merge. The scalability of Ethereum and the performance of its smart contracts should be tremendously enhanced.
In other words, “The Ethereum Merge” is an advancement to Ethereum that simply exchanges the existing proof-of-work (PoW) consensus mechanism with the proof-of-stake (PoS). When the merge happens the existing PoW consensus mechanism will be completely removed and all blocks on Ethereum will be created via PoS.
Why is it dubbed as a Merge?
Ethereum already has a PoS network named the Beacon Chain (launched in 2020), but it is not yet utilized for processing transactions. For currently, it’s basically only a staging site for machines running the Ethereum network to qualify for the PoS upgrade.
Currently, the beacon chain of Ethereum operates individually from the main network. The beacon chain operates in resemblance by utilizing the PoS consensus mechanism, while the Ethereum main network persists to be guarded by the PoW consensus mechanism. The Merger is the two systems eventually merge, and the block expansion of the Ethereum mainnet (Execution Layer) will be governed by the beacon chain (Consensus Layer).
The Countdown: When is “The Ethereum Proof-of-Stake Merge” happening?
The exact date for the merge is September 15th. With the thriving merger of testnets Sepolia and Goerli, the ETH mainnet has decided to begin the merger after the total terminal difficulty (TTD) touches 58,750,000,000,000,000,000,000, and the consensus mechanism will be moved from Proof of Work (PoW) to Proof of Stake (PoS).
The calculated Merge Height is 15537298 and the estimated Merge Time is 09-15 10:03:24. A live assessment is computed here.
The TTD (Terminal Total Difficulty) was approved in the Ethereum All Core Devs call #145 with a TTD of 58750000000000000000000. This is calculated to happen on September 15th with some friction in time due to changes in network hashrate. The Ethereum PoS chain is presently operating and has already undergone its mainnet hardfork, called Bellatrix, on September 6th at epoch 144896.
What is Proof of Stake and why Ethereum is Switching to Proof-of-Stake?
Unlike the proof of work process, in which the user verifies transactions and produces distinguishable blocks by completing a substantial amount of computational procedure, the proof of stake method demands the user to verify possession of a concrete number of cryptocurrency characteristics. The creator of a new block is selected in a pseudo-random process, depending on the user’s assets, also described as ‘stake’. In the proof of stake approach, blocks are said to be born or created, not mined. Users who verify transactions and produce new blocks in this method are said as forgers.
In most proof of stake circumstances, cryptocurrency sections are produced at the launch of the currency, and their amount is fixed. Thus, rather than utilizing cryptocurrency characteristics as a reward, the forgers accept transaction fees as rewards. On several events, new currency blocks can be produced by scaling the coin stack, and forgers can be paid with new currency blocks built as rewards, rather than transaction fees.
Now, Ethereum has been using the Proof-of-Work consensus mechanism for years. The network has become the most widely employed protocol for dApps and is a leader in NFTs and DeFi. So why the necessity to change to the proof-of-stake consensus mechanism?
Unfortunately, the proof-of-work has yielded some problems in the last few months and years. While this consensus mechanism is secure and reliable, it has its limitations when it comes to making transactions fast while keeping costs low. Unfortunately, with a massively growing network like Ethereum, there has been tremendous growth in the costs of transactions in recent years and the swiftness is not flawless.
A change was, thus, needed and the developers at Ethereum recognized the need to update the network. Hence, the consensus mechanism in the Ethereum Merge should be changed. Other small transformations are also being finalized to make Ethereum more efficient and safe.
What Will Happen After the Ethereum Merge?: Vitalik Buterin Explained
After the Merge, another procedure will start – named Sharding. This is a method that will effectively support equipping the network for Ethereum 2.0’s Shard chains – that will completely depend on a functioning PoS network to work. By extending the network workload over 64 blockchains, these shard chains will deliver extra more affordable layers for apps and rollups to save data. They also allow layer 2 techniques to deliver low transaction costs while profiting from the safety of the Ethereum mainnet.
Merge + surge + verge + purge + splurge are not stages!— vitalik.eth (@VitalikButerin) July 25, 2022
They are all happening in parallel.
According to Vitalik Buterin, the Merge is basically the five parallel steps on the Ethereum blockchain and they all are happening in parallel. The five steps – as defined by Ethereum co-founder Vitalik Buterin are:
- The Merge
- The Surge
- The Verge
- The Purge
- The Splurge
What to do if you own any Ether (ETH)?
You don’t have to do anything. All ETH on the Ethereum network under the existing proof-of-work (PoW) consensus mechanism will be untouched by the transformation to the proof-of-stake (PoS) once “The Merge” materializes. As a reuslt, users will not change their day-to-day affairs by utilizing Ethereum — all modifications linked to “The Merge” are separate and connected to the consensus mechanism that guards the network.
How to participate in proof-of-stake (PoS) on Ethereum?
There are numerous methods to participate in proof-of-stake (PoS) on Ethereum. Check this Reddit post.
What are the advantages of the Ethereum Merge?
- The change from PoW to PoS: This is a more efficient consensus mechanism and thus will be advantageous to the Ethereum environment as a whole.
- Energy efficiency: This change from PoW to PoS would also fetch around a 99.95% reduction in the consumption of power that we witness in Ethereum.
- Sharding: Sharding develops the background for the future of the Ethereum blockchain for forthcoming scaling advancements that will be needed as the crypto world and the market expands with time.
What are the elements of the Ethereum Merge?
Ethereum creator Vitalik Buterin is considered one of the early supporters of the Proof-of-Stake consensus mechanism. Thus, it is not surprising that Ethereum has been functioning vigorously on the transition for a long time.
Compared to proof-of-work, the consensus mechanism is said to decrease energy consumption by up to 99.5%. There were consistently uncertainties and delays. But this is just an indication of a procedure that needs quite precise implementation and testing. Therefore, the transformation was hauling on for several months. The elements of the Ethereum merge are:
- the beacon chain
- the merge
- the shard chains
The whole process will be finished when the Beacon Chain is completely executed, as this is the component that controls Proof-of-Stake.
The components mentioned above belong to the Ethereum Merge or the update to Ethereum 2.0. We would like to shortly explain these individual domains:
The Beacon Chain is a parallel chain that has been functioning alongside the mainnet since the end of 2020. The Proof-of-Stake consensus mechanism will be delivered and tested on it. Over time, more and more validators arrived on the chain, allowing the proof-of-stake consensus mechanism to operate efficiently on Ethereum. The Beacon Chain itself cannot operate smart contracts. It has to specify proof-of-stake and put the functionality via its swiftness. To be fully executed in Ethereum, the beacon chain must be merged with the mainnet.
The merge represents the merging of the beacon chain with the Ethereum mainnet. Proof-of-Stake was established on the Beacon Chain and the entire Ethereum network will be converted to Proof-of-Stake via a merger. The change or the merge needs thorough testing in advance to eliminate errors before the merge.
The shard chains are designed to ensure that Ethereum’s scalability is massively enhanced. These extra chains sufficiently spread the transaction load across the network and allow more data to be stored on the network. The beacon chain is designed to coordinate the network of shards.
The shard chains were originally designed to be performed in connection with the beacon chain. But the Ethereum users determined that the Ethereum merge was the priority. The evolution and implementation of a network of shard chains are now to be continued after the merger into 2023.
What is “The Triple Halvening”?
So what is the “Triple Halving”? Let’s begin by splitting down the word itself “Halving” refers to an idea in the Bitcoin algorithm that implicitly reduces the share of bitcoin rewarded to miners by half, every few years. What this does is it reduces the allocation rate of BTC over time and delivers “deflationary stress”. This reduces the BTC sell pressure from miners trading their BTC rewards. As a result, this drives the price of BTC to grow as there develops less supply on the market. Historically, Bitcoin halving events have connected instantly with the commencement of crypto bull cycles.
So, Ethereum’s ETH issuance today under the Proof of Work operates a little differently. Rather than algorithmically reducing the miner ETH prize (i.e. issuance rate), it is achieved via software updates that have been fixed by the community :
•Genesis to 2017: 5 Ether
• 2017 to 2019: 3 Ether (changed via EIP-649)
• 2019 to now: 2 Ether (changed via EIP-1234)
So, According to Etherscan, presently, 6292 new Ethereum blocks are mined per day, which comes out to around 13k ETH allotted per day and disbursed to miners. At these rates, the supply of ETH increases by around 4.3% a year.
In other words, the Triple Halvening” is the name assigned to the big decline in ETH distribution that will happen once “The Merge” transpires and Ethereum is completely elevated to the proof-of-stake (PoS) consensus mechanism. While Bitcoin halves its distribution rate every 4 years, Ethereum will witness its distribution rate decline by approximately 90% at the time of “The Merge”. That’s comparable to *3 Bitcoin “Halvenings” occurring at once! Ethereum will encounter an allocation drop in an instant that will take an extra 12 years to be compared on Bitcoin’s network.
Under the existing proof-of-work (PoW) Ethereum allocates approximately 13,500 ETH per day — an annual allocation of approximately 4.3% of the entire ETH pool. Nevertheless, the PoS distribution standard is chosen based on how much ETH is vigorously being staked on the network.
For comparison, Bitcoin presently allocates 900 BTC per day — an annual allocation of approximately 1.7% of the entire BTC pool. The next two “Halvenings” will decrease Bitcoin’s distribution to roughly 0.8% in 2024 and 0.4% in 2028. With Ethereum’s predicted decline in distribution after “The Merge” to between 0.3% – 0.4%. For the complete information on Triple halvening, read this post.