Ethereum Merge: All You Need To Know

Ethereum 2.0 is Coming

Inspired Analyst

Aug 19, 2022

“The Merge is the biggest thing to happen to Ethereum or even Crypto!”

You must have heard this headline all over the media.

However, understanding what the Merge is can be tricky,

Don’t worry - I have covered all you need to know about this all-important update!

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In short, the merge is a multi-phase upgrade that will ‘make Ethereum scalable, secure and sustainable.’

The whole idea is to make Ethereum ready to be the foundation when the world adopts web3.

So let’s jump into the details.

Why Need The Merge?

Ethereum has witnessed a lot of success and is second only to Bitcoin. However, it was always believed that some critical adjustments were needed to the smart contract and decentralized application platform.

Ethereum can currently support 15 to 30 transactions per second. The speed after the merge will reach 100,000 transactions per second!

The merge is developed to address these issues by shifting the Ethereum protocol to Proof of Stake(PoS), thereby improving the network’s sustainability, security, and economical durability.

Ethereum Post-Merge

After the merge Ethereum aims to be more environmentally friendly, scalable, and secure.

Eco-Friendly Ethereum

Ethereum will use 99.9% less energy moving from PoW → PoS

Currently, Ethereum consumes about 62 million TWh of electricity a year which is almost equivalent to Switzerland’s 9 million citizens!

Needless to say, this is less energy-intensive, the illustration below compares the two protocols’ energy consumption.

Scalable & Secure Ethereum

The functionality of the Ethereum network decreased as more users joined. It can cost hundreds of dollars in gas fees to complete a single transaction, which indicates the network is now experiencing congestion problems and some smaller transactions are priced out.

The upgrades planned in the merge aim to make Ethereum more scalable while maintaining decentralization and security.

It's also worth noting that some of these upgrades are independent of the main Ethereum network we use today, but they will not replace it. Instead, the Ethereum Mainnet will simply 'merge' with the new parallel system that is now being built.

All of this is to be achieved thanks to the Beacon Chain.

The Beacon Chain: Ethereum 2.0’s Processing Engine

The Beacon Chain serves as the foundation of Ethereum 2.0's design. It operates parallel with the Ethereum network as a separate blockchain. It is the main actor in reforming from PoW to PoS.

Consider the Beacon Chain to be a large lighthouse rising above a sea of transaction data. It is continuously scanning, validating, gathering votes, and rewarding validators who correctly attest to blocks, reducing rewards for those who are not online, and slicing ETH from bad actors.

The Merge

The present Ethereum main chain will 'merge' with the Beacon Chain. This update will enable staking over the whole Ethereum network. It will also signal the end of the energy-intensive Ethereum mining process.

After the main Ethereum network and the Beacon Chain have merged, the next update will bring 'shard chains' to the network.

Shard Chains

The next stage of Ethereum 2.0 is the establishment of shard chains, which will enhance Ethereum's data capacity, making the network faster and more scalable.

It's a common database or search engine strategy for breaking up large amounts of data into smaller parts.

Shard chains will add more nodes to the network which will improve scalability and also decentralization. Ethereum’s goal is for nodes to be able to run on consumer hardware like smartphones. This will increase network efficiency overall because no single validator will need to perform all of the jobs by themselves.

Ethereum can currently support 30 transactions per second. The speed of the new shard chains will reach 10,000 transactions per second!

Thanks to the shard chains Ethereum will have a huge number of validators, making it more decentralized, secure, and resistant to manipulation.

Overall Picture

What you should do?

If you own ETH, you don't need to take any action to get ready for the updates. There is no ETH 2.0 token, and following the Merge, your ETH won't need to be upgraded or changed. (Note: Anyone claiming different is probably a fraud; use caution.)

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