At the risk of putting many of you off right from the outset: a spoiler. This blog is about impeding changes to the Ethereum blockchain, on which so many NFT, metaverse, DeFi and other Web3 projects are built. If that does not interest you in the slightest, please feel free to change channels now.
Of those of you still here, I expect a number of you will already be aware that a major change to Ethereum is afoot - expected to take place on or around 15 September. That change is called “The Merge” and it has been dubbed by Mashable as the most important change in crypto this year.
In this short Q&A I will attempt to summarise what is planned in September, and beyond, without getting (too) bogged down in the technical details, of which there are many. The main reason for blogging on this specific, pretty technical, matter is actually a simple one. One of the big sticks used to beat NFT and other projects built on Ethereum is its environmental impact. The planned change is expected permanently to reduce the amount of electricity used by the network by 99.95%.
Great, so what is actually going to happen?
In a nutshell, the Ethereum network is going to move from a proof-of-work to a proof-of-stake consensus mechanism. Proof-of-work is a very computationally intensive system that involves participants called miners using huge amounts of computing power in order to solve a complex mathematical problem. Proof-of stake involves validators instead of miners, who achieve consensus by staking their own native currency, Ether (usually just called ETH), with the risk of losing it if they “misbehave”. That is the simple version and there is more detail here if you are so inclined.
There is actually a proof-of-stake Ethereum blockchain already up and running called the Beacon Chain. Currently, however, it is neutered so there is very little that you can actually do on that chain. When The Merge happens, the part of Ethereum that supports transactions and smart contract capabilities will be activated for the Beacon Chain. The plan is that the proof-of-work chain is then basically switched off, completing The Merge.
Will the switch to proof-of-stake improve Ethereum’s environmental impact?
Yes, massively. Currently, according to Digiconomist, its electricity usage is around the same as that of The Netherlands. As mentioned above, The Merge should reduce it by around 99.95%.
What else will improve with The Merge? Will the cost of using the network come down for example? Will it be faster?
No. The Merge will not materially affect gas prices (i.e. the prices paid in order to record transactions on the blockchain), the speed of processing or number of transactions per second Ethereum can handle.
Hmm, disappointing. Is there a plan to address those things?
Yes, further developments are planned in what Ethereum founder Vitalik Buterin has called “The Surge”. This involves a process, to be implemented after The Merge, known as sharding. In essence, this involves the splitting up of databases to spread the work of processing transactions. Sharding will work together with deployment of so-called “Layer 2 roll ups” – solutions built on the main (Layer 1) Ethereum network that “roll up” hundreds of transactions into a single transaction that are then recorded to Layer 1 – in order to increase the efficiency and speed of the network.
The Ethereum founder predicts that the implementation of sharding together with the use of roll up solutions will improve the current rate of 15-20 transactions a second to around 100,000 per second.
Ok, and now you will tell me there are more stages that rhyme with The Merge?
Correct. In addition to The Surge, Buterin uses the term “The Verge” to refer to a process that will make it easier for users to act as network validators. There is then “The Purge”, that involves cutting down the amount of space used and the requirement for each node to store historical transactions, and also a Splurge, but I think that is probably enough for now. Let's focus on getting through The Merge first!
Ethereum Merge? Get Ready for the 'Surge, Verge, Purge, and Splurge', Says Vitalik Buterin