INTRODUCTION
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The Ethereum merge is the biggest news in the blockchain world right now. Before entering into the merge, let’s discuss about the consensus mechanism; how blockchains agree on whether an event actually happened.
ETH was using Proof of Work or we can say it as proof of burnt energy. Miners use expensive hardware to compete to solve complicated problems to win the block reward. This spanks a huge amount of energy over 100 TwH at the time of usage but every time it becomes progressively harder and harder to mine a block. The equipment is also specialized, you need a lot of rigs, cheap electricity, etc. none of this is great for decentralization.
On the other hand, we consider Proof of Stake. You take ether to activate software that verifies transactions in exchange for a transaction fee. Validators are selected randomly with the probability of selection proportional to the amount of ETH staked. This is much closer to a web3 implementation.
The Merge
In simple words, Ethereum shifted from Proof of Work to Proof of Stake. Before shifting, Ethereum launched a test chain to test the PoS called Beacon chain. This chain has been running PoS in parallel with the existing Ethereum PoW mainnet although without smart contract functionality and the one-way bridge has been accepting staking deposits with over 326000 users active on the network. Since Apr 2022, the beacon chain is 10.4 million each or around 36 billion dollars or to put in another way, the entire solana market cap. The fomo is clearly catching as ether has been withdrawn from exchanges in vast quantities. So, the final piece is to bring the entire history of the current ETH PoW chain and merge it with this beacon chain to create a discrete short in the new network, complete with smart contract using PoS.
Merging is no small task, but there was big news recently with the announcement of successful dry run on the kiln test. Kiln is the final public test net before the big one. once the merge is behind us, the next big challenge is sharding which will spread the network load across 64 discrete shards.
Improvements in the Merge
Proof of Stake Ethereum promises to lower energy consumption by 99.9 percent. Issuance and inflation will also be radically reduced. Ultrasound money’s simulator predicts supply will contract at -1.8 percent yearly while new ether produced will plummet to just half a million a year, but that is of course just a simulation. The main thing to be noted is that the burn rate doesn’t move and that’s because scientists say the merge will do pretty much next to nothing to the cost of transacting on Ethereum.
If we consider about the validators and the numbers say that, to become a validator we need to have a minimum of 32ETH. In phase 0 there has been a minimum validate account of 16,384 and that is a lot. For phase 1 and beyond the recommended minimum validators per committee is 128. So, in order for all shards to learn each other’s state on every slot across 64 shards, that would mean 262,144 validators and total 8,388,608 ETH staked.