Cryptocurrency

Ethereum Merge Transition to Proof-of-Stake is Complete; but What’s Next?

Ethereum Merge

Ethereum Mainnet Merge LIVE!

For the uninitiated, Ethereum is nothing but the transitioning of the older proof-of-work based Ethereum mainnet to a newer and more energy efficient proof-of-work consensus mechanism. Nothing else in the Ethereum blockchain is changing in this Merge. The execution layer of the Ethereum blockchain, that provides the actual functionality and security to the network remains exactly the same, while the consensus mechanism for adding blocks to the blockchain, or the consensus layer, is being replaced with the PoS model.

The reason why everybody in the crypto industry had their eyes on the Ethereum Merge is because of the fact that it is the single largest smart contract capable blockchain network by a far margin. Hence, making such a huge transition, without any down time to the Ethereum network is a huge deal which required a lot of precise engineering and coding skills by a collective of extremely dedicated programmers. Any number of things could have gone wrong on the 15th of September, 2022, around 12:18 pm IST, when the Ethereum Merge went live. But it went through without a hitch and hence is a cause for celebration for the entire Ethereum as well as the broader crypto community at large.

Very simply speaking, and to quote an example, Ethereum Merge was practically like repairing and upgrading a spacecraft, flying through infinite space with a new and more efficient rocket engine, without landing on any planet. One small mistake and the rocket might just implode, right? Ethereum Merge too took place without a second of downtime, just after a certain block height and TTD was reached, the network automatically switched from the PoW consensus layer to the existing PoS consensus layer, also known as the Ethereum Beacon Chain.

Read more: How will Ethereum Proof of Stake work?

So now the Ethereum Merge is Complete. What’s next?

Contrary to what most people think, Ethereum Merge was nothing but the first in a series of steps that are going to be taken to make Ethereum a more efficient, scalable and secure network going forward. The steps ahead, quite comically named, the Surge, the Verge, the Purge and the Splurge will continue to make Ethereum’s proof-of-stake blockchain more scalable and secure.

Now let’s take a closer look at these future steps that Ethereum proof-of-stake blockchain is slated to undergo in the near future. 

The Surge

The Surge is referred to as the step in the Ethereum masterplan which intends to make Ethereum far more scalable than it ever was before. Here, a concept called ‘sharding’ is going to be implemented.

Sharding is a process which would split Ethereum’s entire network into smaller pieces, also known as ‘shards’ which according to the plan will drastically increase the network’s scalability. This is done by breaking up the data that is being processed by the Ethereum mainnet into 64 smaller segments. It’s like splitting Ethereum’s single broad highway into 64 smaller individual highways so that traffic can be managed better. This could only be done when it is on Proof-of-stake consensus mechanism and hence the Ethereum Merge came first. 

Additional Read: Ethereum Merge Misconceptions

The Verge

The next phase, known as the Verge will introduce Verkle trees, a network scalability concept. According to Ethereum’s co-founder, Vitalik Buterin, Verkle trees are a ‘powerful upgrade to the Merkle proofs that allow smaller proof sizes’. The Verge will essentially optimise storage and reduce node sizes and thus achieve the ultimate objective of making Ethereum more scalable.

The Purge

The Purge is the next step in the Ethereum masterplan which has the objective of reducing, or ‘purging’ spare historical data. This process will essentially reduce the amount of historical data on the network and will make the process of validating the blockchain an even more efficient process for validators on the new Proof-of-stake consensus mechanism. It would also cut down on the network congestion and allow transactions to be processed much faster. In fact it is expected after ‘The Purge’, Ethereum might be able to process over 100,000 transactions per second. 

The Splurge

This is the final step of the Ethereum masterplan, which Buterin describes as the ‘fun stuff’. This phase would primarily be dedicated to make sure that all the earlier steps are functioning as they should and weed out bugs from the code, if any. The major tough work will already be completed by the Purge to make Ethereum more scalable.

Here’s a Mizrapur reference for all of you fans out there. 😉

Ethereum Merge Updates Till Date

FINAL ETHEREUM MAINNET MERGE 15 SEPTEMBER, 2022
BELLATRIX UPDATE 6 SEPTEMBER, 2022
SEPOLIA TESTNET UPDATE 22 AUGUST, 2022
GOERLI TESTNET MERGE 11 AUGUST, 2022
TENTH MAINNET SHADOW FORK 27 JULY, 2022
SEPOLIA TESTNET MERGE 6 JULY, 2022
MAINNET SHADOW FORKS 12 APRIL, 2022
KILN TESTNET MERGE 16 MARCH, 2022
ARROW GLACIER 9 DECEMBER, 2021
ALTAIR UPGRADE 21 OCTOBER, 2021
LONDON HARD FORK 5 AUGUST, 2021

Now, it is well known that updating a blockchain network is hard work, especially when it is a network as big and popular as Ethereum which has so much value staked on top of it. So the Ethereum Merge was undertaken in a very staged manner to ensure all bugs from the system are weeded out and the final product, when released out into the world, cannot easily be compromised by bad actors in the ecosystem.

Crypto Market Down! Bitcoin & Ether Price Trade in the Red!

The 24 hours following the Ethereum Merge, which took place on the 15th of September, 2022 around 12:18 pm IST was a bloody one for the crypto markets. There was already a lot of fear, uncertainty and doubt amid the scalding hot consumer price index (CPI) numbers in the US which had come out the week before, sending the crypto markets, along with other asset classes spiralling down.

And then right after the Merge too, over the next 24 hours, we saw a tragic loss in ETH price under $1500, where ETH lost over 8% in market capitalization. 

Ethereum Merge 

Ethereum price, this time around has been one of the poorer performers in terms of price in the past week. As mentioned earlier, ETH price lost over 8% since then and is very close to breaking down below its local lows and this event set back Ethereum to trade below its psychological price level of $1500.

Additional Read: Ethereum Price Prediction

Ethereum Price below $1500 despite the Successful Implementation of the Merge!

Technically, ETH price has broken down below its diagonal trendline support (marked in blue) and has retreated into the bearish descending triangle pattern on the chart. Its next logical level of support would be around $1420, and if ETH price breaks down below that, we may see a further fall down to $1260 (marked in black), the distant level of support for Ethereum as of now. As of now, with the Relative Strength Index at 40 as of writing, and Ethereum price trading below the 50 day moving average, we may see strong selling pressures on the price going forward.

A crash such as this, after a major event in the crypto world is not uncommon. It is helpful to remember what happened during Cardano’s move to add smart contract capability to its blockchain last year. Speculations around such news can push ETH price to unsustainably high valuations of tokens but soon after they can come crashing back down. It will be interesting to see the Cardano Vasil Upgrade impact on ADA price. 

Impact of the Ethereum Merge on ETH’s on-chain metrics

Ethereum Merge

One of the most critical and positive on-chain metrics for Ethereum amid the Merge has to be the total value staked to the ETH 2.0 smart contract. It has been on a continuous rally despite the dip in prices in the year-to-date period. Thus, it seems a lot of people had bet positively on the Ethereum Merge and are still holding on. However, now after the Merge, all the staked ETH tokens on the deposit contract will stay locked until the Shanghai upgrade comes into effect, the date for which yet isn’t known. 

Additional Read: Ethereum Technical Analysis

Bitcoin Price under $20K and other Top Crypto Prices including popular meme coins in the RED!

Post the Ethereum Merge, the overall market too corrected significantly, and rightly so. The second largest crypto by market cap corrected by over 8% in a 24-hour period which definitely was going to pull the rest of the market down with it too.

Bitcoin lost over 1% in the same timeframe, along with other major cryptos like Binance Coin (BNB) and Polygon (MATIC) losing about 0.7% and 2.3% in the same time period. Popular memecoins like Dogecoin (DOGE) and Shiba Inu (SHIB) also shed a sizable value off their market caps in the correction. 

What does the Merge mean for Ethereum users & how does it impact the security of the blockchain?

When it comes to Ethereum users, nothing has really changed after the Ethereum Merge. Ethereum’s execution layer remains the same as before so smart contracts built on it will run without a hitch and all functionalities will continue to work properly. 

As of now, the security of the Ethereum blockchain network has improved slightly, thanks to this transition from Proof-of-stake to Proof-of-work. That is because in the PoW model, there is always a risk of a 51% attack. A 51% attack is nothing but an attack on a blockchain by a group of miners who control more than 50% of the network’s mining hash rate, or computing power. In PoS, theoretically it’s a possibility but the possibility is extremely distant and to undertake and execute such a 51% attack is nearly impossible in a PoS model.

What does the Ethereum Merge for developers & new projects?

From a developers and project engineers perspective, the Ethereum Merge means something very fundamental. Gone are the days where you need to have huge ASIC machines running 24×7 to keep the network alive. Now smaller computers requiring less power would be able to utilise the Ethereum network, anything from a laptop to even a Raspberry Pi. 

With the switch to proof-of-stake, Ethereum energy consumption after the merge will also be cut by 99.95%. This would dramatically increase the appeal of Ethereum to institutions that previously had concerns with the blockchain’s environmental impact due to mining.

Ethereum Merge Impact on Miners and Supply of ETH Token

The primary aftermath of the Ethereum Merge would be the natural transition from the use of highly specialised ASIC chips and machines to everyday computers that can now tap into the network. Hence, miners who don’t want to dispose of their machines would shift to other proof-of-work tokens like Ethereum Classic, EthereumPoW or something along those lines. But the problem is there is a very slim picking for such out there, and none with the massive profitability that the older PoW based Ethereum had. 

The hashrate for PoW altcoins like Ethereum Classic (ETC) and Ravencoin (RVN) more than doubled in the hours after the Merge took place. However a rising hashrate, is rising difficulty which means miners are less likely to successfully mine a block and reap the block reward.

On the flip side, those who can and have staked the requisite amount of ETH tokens to the network will transition to become validators on the Ethereum network and no longer remain miners. 

How the Merge Impact the Future of Crypto & Web3 Ecosystem!

With the second largest (by market cap), smart contract capable blockchain network shifting to a greener and more efficient proof-of-stake consensus mechanism, the Ethereum Merge is going to bring about a tectonic shift in the future of crypto and the Web3 ecosystem. 

This move would bring down worldwide electricity consumption by 0.2% and if we were to consider the sheer scale and size of what Ethereum can be in the future, it can bring about a huge positive change to create a greener financial sector overall.

Additional Read: Ethereum Gas Fees

What will Happen to Staked Ethereum?

Well, nothing. All the staked Ethereum will remain staked for a duration and cannot be unstaked immediately. The timeline for this hasn’t been decided yet, but the eventual Shanghai Upgrade will allow for unstaking of the ETH tokens from the deposit contract.

Additional Read: How to Stake ETH

WHAT DOES THE MERGE MEAN FOR COINDCX USERS?

For ETH:

  1. Spot F2C (ETH/INR and er-20 denominated tokens in INR): There will be no impact on this and trading will continue as is.
  2. Spot C2C and margin: There will be no impact on this and trading will continue as is.
  3. Futures: There will be no impact on this and trading will continue as is.
  4. Stake: There will be no impact in staking either. ETH will be staked as is and will be liquidated post 6 months to a year of the Gray Glacier upgrade
  5. ERC-20 tokens: All ERC-20 tokens will be upgraded automatically to 2.0 for users.
  6. LIQETH: LIQETH will also go live and an update regarding the same will be shared with the users once we process the release of ETH 2.0 gradually.

Important Notice for CoinDCX Users on Ethereum Merge 

Frequently Asked Questions About the Ethereum Merge

What was Ethereum Merge?

Ethereum is nothing but the transitioning of the older proof-of-work based Ethereum mainnet to a newer and more energy efficient proof-of-work consensus mechanism. Nothing else in the Ethereum blockchain is changing in this Merge. The execution layer of the Ethereum blockchain, that provides the actual functionality and security to the network remains exactly the same, while the consensus mechanism for adding blocks to the blockchain, or the consensus layer, is being replaced with the PoS model.

Is ETH Merge Complete?

Yes, the Ethereum Merge is complete however it must be noted that there is a broader plan in place which still is far from over. In fact, Ethereum Merge was only the first step in that plan and a lot more is yet to come. The steps ahead, the Surge, the Verge, the Purge and the Splurge will continue to make Ethereum's proof-of-stake blockchain more scalable and secure.

What comes next after the MERGE?

After the Ethereum Merge, we will see the next set of steps unfolding soon - namely the Surge, the Verge, the Purge and the Splurge - which are all designed to make Ethereum's proof-of-stake blockchain more scalable and secure.

Is Ethereum Proof of Stake better than Bitcoin Proof of Work?

Yes, Ethereum proof-of-stake is significantly better than Bitcoin proof-of-work because of a number of factors. Firstly, Ethereum is smart contract capable with Bitcoin isn’t, thus Ethereum has far more real world uses than Bitcoin ever did. Secondly, Ethereum now running on a Pos consensus mechanism is far more eco-friendly than Bitcoin which still runs on the energy hungry mining based PoW consensus mechanism.

Also Read:

Will Ethereum 2.0 Replace Ethereum?

Ethereum vs Ethereum Classic

Ethereum Merge FAQs

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