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All eyes are on the Ethereum Merge event as Ethereum 2.0, or the Beacon Chain, merges with the Mainnet in September 2022. After this upgrade, the Ethereum network will no longer use a proof-of-work consensus mechanism. Instead, it’ll use the more sustainable proof-of-stake model.
It means less energy consumption and a more streamlined process benefitting many Ethereum stakeholders in the long run. Learn more about this merger’s complexities and what it means to the crypto community at Bitcasino.
Ethereum 1.0 or the Mainnet initially runs transactions through a proof-of-work (PoW) consensus. Here, miners solve a complex mathematical equation to compete for the block reward. This process consumes too much energy, which poses environmental and scalability issues as Ethereum branched out to smart contracts, NFTs and DeFi protocols.
To combat this issue, developers created Ethereum 2.0 in parallel with the Mainnet. It runs on the Beacon Chain, which validates transactions through proof-of-stake (PoS) consensus that consumes less energy.
In this consensus model, a chosen node validates and adds transactions on the blockchain in exchange for crypto. It means no more energy-intensive competition for who gets to mint and receive the reward.
If users want to partake in the process, they need to stake 32 ETH in their accounts as collateral. Only then can they be considered for the consensus protocol.
The Mainnet and the Beacon Chain are actively processing Ethereum transactions separately. With the Merge, these two will become one blockchain and ultimately phase out the PoW consensus.
After the Merge, the Ethereum blockchain will be more scalable and environmentally friendly through the PoS consensus since it can process more transactions using less energy.
Changing protocols is no easy task for a blockchain as big as Ethereum. It requires years of planning, testing and adding upgrades. See the stages this Merge has gone through and will go through below:
The plan for merging began on December 1, 2020, when developers launched the Beacon chain. Serving as the separate 'consensus layer', it tested the PoS consensus for the Ethereum network and served as the ledger of accounts that conducts and coordinates the network of validators.
Unlike the Mainnet, this cannot process smart contracts yet. However, the Beacon Chain will be updated to also work with smart contracts after the Merge.
Afterwards, the Bellatrix upgrade occurred on September 6, 2022, to prepare the Beacon chain for the Merge. It updated the Ethereum Virtual Machine, where decentralised apps are hosted to improve network security, performance and scalability.
The Paris upgrade, which acts as the execution layer, will commence the Merge and transition of the Ethereum network from the current PoW consensus to PoS. It'll be triggered once the network reaches the terminal total difficulty (TTD) of 58750000000000000000000. There’s no exact time since it depends on the network’s hash rate.
The Merge will happen on September 14 or 15, 2022, once the Paris upgrade occurs. When the threshold is exceeded, the next block will be minted by Beacon chain validators, and PoW will no longer be used.
Ethereum developers have assured their stakeholders that the upgrade will not drastically affect transactions. The network will only be able to accommodate larger transaction volumes once the PoS consensus has been implemented.
Moreover, past transactions won't be affected by the Merge. The records will remain intact even after the Merge since it will only combine the two layers (the Mainnet and the Beacon Chain).
Switching Ethereum from PoW to PoS has already been mapped out in advance, mainly because of its benefits. Check them out below:
PoS consensus allows a more scalable network compared to its PoW counterpart. That's because this model can avoid future bottlenecks in validation processes when miners compete to mint data on the blockchain.
Since there are fewer bottlenecks in transactions, the process is more streamlined. Only chosen nodes are allowed to validate transactions which means less traffic on the blockchain.
The Merge will reduce Ethereum's energy requirements by 99.5%, significantly lowering carbon emissions. It's a more sustainable and environmentally-friendly approach for blockchain transactions.
Once the Merge occurs, the PoW consensus will no longer be used. The Beacon Chain will take over validating transactions after the update runs successfully. It does not mean the Ethereum network will start from scratch following the update.
All transactions, including smart contracts and balances since 2015, won't be moved so that they will be accessible during and after the Merge. It'll be business as usual for Ethereum but with a different consensus running the blockchain processes.
The Ethereum developers reassured users that there would be zero downtime while the upgrade commences. It means validators can still process your transactions despite the upgrade.
As Ethereum developers have mentioned, there will be no need to prepare for the Merge. The network will retrain all the transaction history from Mainnet and the Beacon Chain.
Gas fees will remain the same after the Merge. That's because the update only concerns the consensus mechanism and not an expansion of the Ethereum network.
There will be slight changes in the transaction rate right after the Merge, but they will be unnoticeable and remain the same.
ETH is still the native coin of the Ethereum network. The Merge will only combine the Mainnet and the Beacon chain into one network while maintaining the ETH coin as its native currency.
Staking withdrawals are not yet possible on the Ethereum network. It will be activated once the Shanghai upgrade commences by 2023.
Words by: Sunday Carreon