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The Merge will help Ethereum reduce Carbon Footprint by 99.95%
The Merge will help Ethereum reduce Carbon Footprint by 99.95%

August 30, 2022

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The Ethereum Merge is slated to the be the most significant event in the crypto space in 2022. The long-awaited upgrade from energy-guzzling Proof of Work (PoW) consensus to Proof of Stake (PoS) consensus algorithm is now very close to reality. This will not just help Ethereum to continue delivering on its scalability roadmap but also be more climate friendly. With PoS, the carbon footprint will be reduced by ~99.95%. All that talk about NFTs not being green will be obsolete.

On August 10 this year, Ethereum completed the Goerli public TestNet merge and it is anticipated that the complete Merge will happen around 15th September as per the consensus layer call.

What is the Merge?

Ethereum was launched in 2015 as “A Next-Generation Smart Contract and Decentralized Application Platform”. Though it was launched with PoW as the consensus algorithm, the vision was always to migrate to the energy-efficient PoS consensus. After finalizing the “Casper the Friendly Finality Gadget” as the PoS consensus mechanism, the focus switched to the transition challenge – How to replace the heart of the network when the heart is still breathing?

The solution to the transition challenge was to first launch an independent network with PoS mechanism called Beacon Chain. The beacon chain was launched in 2020 and has been running in parallel to the current Ethereum node mainnet and is already secured by more than 240k validators.

The second part of the transition is the Merge. With the Merge, all the historical blocks as on the date of the transition will be preserved and all the future blocks will be written based on the PoS consensus. Essentially, the Merge will involve the replacement of the consensus without impacting the data layer.

The process behind The Merge

Terminal Total Difficulty (TTD) describes the mining of a specific block at the address 58750000000000000000000, when the old network finishes and the new one starts.

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Since the Beacon Chain's debut, a number of crucial tests, improvements, and forks have been made as part of the switch to proof-of-stake, including:

Why transition to PoS?

The PoS will have a significant impact on the Ethereum network and the entire web3 ecosystem.

1.    Sharding - Unlike Bitcoin, the Ethereum network is a smart contract platform that allows decentralized applications to run on the network. Though not much will change in terms of the dApps that can be built on Ethereum after Merge, it will enable the process called “sharding”. Sharding allows the network to run as multiple parallel chains and will help increase the transaction throughput from 30 tps right now to 100,000 as per the Ethereum Foundation.

2.    Greener Blockchain – Ethereum's energy consumption will be reduced by ~99.95% following the Merge from proof-of-work (PoW) to proof-of-stake (PoS). After the Merge, Ethereum will use dramatically less carbon to be more secure.

3.    Security – The PoS consensus will lend more security to the Ethereum network as compared to PoW as PoS reduces centralization risk with more nodes securing the network and economic penalties for misbehaviour make 51% style attacks exponentially more costly for an attacker compared to PoW.

4.    Deflationary economics – The Merge will lead to a large drop in the ETH issuance per day, from the current annual issuance of about 4.3% of total ETH supply to around 0.4%. Combining this with the EIP-1599, the Ethereum will become deflationary during periods of high user activity.

What unfolds after the Merge?

The Merge's main objective is to facilitate the transition from proof-of-work to proof-of-stake consensus protocol. Developers are striving to eliminate features that might slow down the transfer in order to temporarily prevent users from withdrawing staked ETH once the Merge is complete. However, they will probably be fixed in a "cleanup" update that comes after the merge.

The Surge, the Verge, the Purge, and the Splurge are four additional stages that developers will work on when the Merge is finished and Ethereum's newly accepted consensus layer begins to add new blocks to the Ethereum blockchain using the proof-of-stake consensus method. These will keep enhancing the scalability and security of Ethereum's proof-of-stake network.

With proof of stake, which is already employed by other blockchains, miners are forced to lock up cryptocurrency they already hold as collateral for the ability to verify transactions and risk losing those tokens if their calculations are incorrect. This significantly reduces the amount of energy consumed.

Top 5 Misconceptions about The Merge

Like with other highly anticipated and significant events, there are many misconceptions that are pervasive in the blockchain ecosystem. The five most typical ones are below:

●     To operate a node, 32 ETH must be staked

On the Ethereum network, there are two different kinds of nodes: those that can propose blocks and those that can't. The network's security depends on those who are not compelled to contribute ETH since they keep all block proposers responsible even if they do not propose any blocks.

●     After the Merge, gas prices will plummet

The Merge won't cut gas prices since it won't increase network capacity and instead alter the general consensus algorithm. However, scaling solutions, most of which are aimed at layer 2s, are now being developed that are intended to achieve precisely that.

●     The rate of transactions will significantly rise

Even after the integration, transaction speeds on the mainnet will mostly stay the same, with a few minor exceptions.

●     The Merge will cause a temporary network outage

There will be absolutely no downtime throughout the Merge upgrade. The network should always continue to operate as designed.

●     After the Merge, all staked ETH will be withdrawn

The pace at which validators leave the network is capped. Security considerations drive this action. There are restrictions in place that let around 43,200 ETH leave each day.

 

About The Author 

Author

Dr. Ravi Chamria is co-founder CEO of Zeeve Inc, an Enterprise Blockchain company. He has an experience of 18+ years in IT consulting spanning across Fintech, InsureTech, Supply Chain and eCommerce. He is an executive MBA from IIM, Lucknow and a prolific speaker on emerging technologies like Blockchain, IoT and AI/ML.

Passionate About: Blockchain, Supply Chain Management, Digital Lending, Digital Payments, AI/ML, IoT

Specialities: Strategic Management, Technology Innovation, Product Management


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