The Ethereum Merge Is Completed. What Is next?
The long-awaited Ethereum Merge is now complete — here is the long-term roadmap for the protocol’s continued development.
Ethereum is expecting to make its biggest change ever this month, transforming how transactions are processed and secured on the blockchain. But the Merge, as the switch from proof of work to proof of stake is known, is more than just technical. It’s expected to bring major changes to the security and economics of the network, and ultimately its structure of control.
Previously, under a consensus mechanism called proof-of-work, Ethereum was secured by miners, where it requires high consumption of computational power. Now, under a different mechanism called proof-of-stake, the network is secured by stakers, or Ether holders who lock up their tokens. The Ethereum Merge marked the first time for a blockchain to ever transition from proof-of-work to proof-of-stake.
How Will the Ethereum Merge Influence Your Crypto Investments?
Some experts say the update could spur growth for Ethereum after new blockchain projects ate into its market share over the past six months. Many have looked at the Merge as the grand finale for the network. But now, according to Buterin, Ethereum will be tackling “the Surge, the Verge, the Purge, and the Splurge.”
The Merge was the first step in this five-part process, which has since been elaborated upon by a number of Ethereum developers, ecosystem participants, and commentators. The key change of the Merge is the drastic reduction in power consumption, reducing Ethereum’s energy usage by 99%. Hours before the Merge took place, Buterin quoted Ethereum researcher Justin Drake’s estimate that the event would also reduce global electricity consumption by 0.2%.
2023 is earmarked as the year that Ethereum will implement sharding, an important step in increasing the scalability of the blockchain’s ability to store and access data.
The Ethereum Foundation describes sharding as the process of separating a database horizontally to spread the network’s workload. Ethereum will use sharding in synergy with layer-2 rollups by splitting the large amount of data across the network.
The next phase will introduce Verkle trees, which will also tackle the issue of scalability. Verkle trees are a “powerful upgrade to Merkle proofs that allow for much smaller proof sizes,” according to Buterin. The so-called Verge will optimize storage and reduce node sizes. Ultimately, this will make Ethereum more scalable.
The Purge + Splurge
The Purge aims at reducing, or “purging,” spare historical data. Reducing the amount of historical data will make the process of validating the blockchain more efficient for validators under the new proof-of-stake consensus mechanism. This should minimize network congestion and allow many more transactions to be processed on the blockchain. Buterin said that by the end of this phase, Ethereum should be able to process 100,000 transactions per second.
Gas Fees, Staking & Speed
- Gas fees
Ethereum gas fees will remain the same for now. In theory, the Ethereum upgrade sets the stage for sharding, opening up possibilities for cheaper gas fees in the future.
Staking ether now is expected to yield about 4.6% annually, while roughly 11.8% of ether has been staked, according to data from Stakingrewards.com. Holders will not be able to withdraw their staked ether until Ethereum’s Shanghai upgrade, which is expected to take place in 2023.
- Transaction speeds
Ether holders can expect similar transaction speeds after the upgrade. The slight changes will be unnoticeable to the average user.
Get Ready for The Merge With Tokenize Xchange
The Merge is a significant milestone for the Ethereum network and the larger Web3 ecosystem. At Tokenize Xchange, we aim to ensure a seamless transition for users holding ETH. If you’re keen on learning more about the Merge, visit our Ethereum Merge page. We’ll continue to update our blog and the official Tokenize Xchange Twitter as more details become available.
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