The Ethereum mainnet is set to merge with the Beacon Chain, completing the shift to Proof-of-Stake.
Due to ongoing complaints about the energy consumption of Proof of Work consensus mechanisms, Ethereum has been preparing for a while to switch to Proof of Stake. This change is known as “The Merge” and is one of the biggest challenges the crypto community has faced so far.
Merging is not a process that can happen overnight. It is a complex process that requires a great deal of development and maintenance effort. In this article, we want to review what “The Merge” is and what we know, at this point, about the process.
What is “The Merge”?
Today, Ethereum works in a similar way to Bitcoin: a group of decentralized miners validate each transaction that occurs on the network. As a reward for the work they do, these miners receive a certain amount of ETH.
This method uses very powerful computer systems to solve the mathematical puzzles surrounding transactions. It is an energy-intensive method, which has earned it much criticism from the community.
And this is where “ comes inThe Merge”, which aims to change from a mining-based Proof of Work consensus mechanism to a Proof of Stake mechanism, which will make the blockchain 99% more energy efficient.
In Proof of Stake, transactions are validated by addresses that have staked - locked in a smart contract - a certain amount of ETH. With this system, rewards are proportional, meaning: the more ETH you have staked, the more rewards you receive.
“The Merge” is part of a set of improvements aimed at making Ethereum faster, more efficient and, above all, cheaper to use.
Beyond energy consumption, one of Ethereum’s biggest problems is its transaction fee prices. A $50 token swap on an Ethereum-based decentralized exchange like Uniswap can have a transaction fee of up to $XNUMX when the network is heavily congested.
The move to Proof of Stake will first and foremost address Ethereum’s gas price. But it will also lay the groundwork for certain improvements that will allow the blockchain to advance in its development.
It may interest you: Ethereum moves closer to merging with Ethereum 2.0 after new hard fork arrives
Beacon Chain: Ethereum's Proof of Stake Network
Currently, while the Ethereum mainnet is still running on Proof of Work, there is a parallel network where the Proof of Stake mechanism has already been activated. This network is called Beacon Chain.
Beacon Chain was launched in December 2020 and since its launch, it already has more than 330.000 validators, who have Staked about 10,6 million ETHHowever, the network is isolated and for now the only thing we can do on it is stake ETH.
“The Merge” will merge the Ethereum mainnet (which supports transactions and smart contracts) with the Beacon Chain. This will remove Proof of Work and the chain will become Proof of Stake.
How much ETH do I need to create a validator node?
To create an Ethereum validator node, 32 ETH is required. At first glance, this may seem like a very high number, but there is a reason for this choice. It is a high enough number to prevent the involvement of malicious actors, who could manipulate the network. However, it is affordable enough for more than one validator to exist on the network.
In addition, there are services like RocketPool, where we can participate with only 17,6 ETH (16 ETH + 10% as collateralization), which makes it easier to access these nodes.
When will the merger happen?
Initially, Tim Beiko, one of the members of the Ethereum Foundation, stated that the merger would come a few months after June 2022. However, the updates have been delayed due to various development issues.
However, according to the information appearing on the official Ethereum website, the merger is still planned for the third or fourth quarter of 2022. Finally, it will be next September 15 when the long-awaited Ethereum merger will take place, although from September 6 all the operations will begin so that the Ethereum mainnet merges with the Beacon Chain, changing to the Proof of Stake model.
From here, Ethereum will carry out a slow rollout across its entire network that will last until 2023. For this slow rollout, the network will be fragmented, dividing the data into small pieces so that the network can process it more quickly and without congestion.
In this sense, once the merger is complete, some features, such as the ability to withdraw ETH staked, will be temporarily blocked. This is because the merger plans include a post-merger “cleanup” to address the new features, something that should occur very soon after the merger.
It may interest you: Ethereum prepares to activate Proof of Stake on its network
What will happen after The Merge?
Once The Merge occurs, the Ethereum mainnet will be divided into 64 “shard chains” or fragments.
According to own Ethereum Foundation, the need to scale across shard chains has been offset by layer 2 scaling solutions such as Optimism or Arbitrum.
Layer 2 scaling solutions temporarily transition ETH and ERC-20 tokens to another blockchain, completing the computational work for a fraction of the cost and at a much lower price.
Over time, fragments are likely to coexist with the layer 2 technologies. The Ethereum Foundation has noted that it will be up to the community to gauge the need for “multiple rounds of sharded chains,” but that this could be a system capable of generating “infinite scalability.”
[hubspot type=form portal=20298209 id=9b7614b5-c31e-44e5-ac91-f0f686d614cd]
