The Merge is not the most important upgrade. Here’s why.

What is the Merge?

The upgrade event aims to migrate Ethereum from a Proof-of-Work (PoW) to Proof-of-Stake (PoS) consensus mechanism, and this achieved by merging the existing Ethereum execution layer with the proof-of-stake layer, the Beacon Chain.

What can we expect from the Merge?

Reduced Energy Consumption

First, the energy consumption of the Ethereum network is expected to decrease significantly. According to Ethereum researcher Carl Beekhuizen, the power usage of the network will plunge by 99.95% post-Merge and a “Proof-of-Stake Ethereum therefore consumes something on the order of 2.62 megawatt”.

Deflationary Token Supply

After the Merge, the token supply of Ethereum is expected to reduce and become deflationary because of miners being removed from the network. But how does this occur?

What’s after the Merge?

According to Ethereum founder Vitalik Buterin, the Merge is the first of five key upgrade phases to the Ethereum Network. The other 4 are known as The Surge, The Verge, The Purge, and The Splurge.

The Surge

After the Merge comes the Surge, which aims to greatly increase the scalability of the Ethereum network. This will be done via sharding, a process which splits data in a blockchain into smaller partitions known as shards. By doing so, it reduces the burden of handling large amounts of data and reduces network congestion while increasing transactions per second.

The Verge

After implementing sharding with the Surge, the Verge will implement ‘statelessness through Verkle trees’ according to Vitalik. Without going into the technical aspects, it essentially means the Verge will replace the current Merkle proofs and allow smaller proof sizes. These proofs propagate the network faster and reduce node size while optimising storage.

The Purge

Unlike the dystopian horror show, the Purge on the Ethereum network will focus on removing spare historical data and technical debt from the network. You could think of it as clearing your cache or temporary files from your browsers. While the details of the upgrade are yet unknown, it is expected to improve the transactions on-chain further and increase the efficiency of validating the blockchain.

The Splurge

While the upgrade for the Surge has not been defined yet, Buterin describes the last phase as “the fun stuff.” It ensures that the network continues to run smoothly and incorporates certain changes such as Proposer/Builder Separation (PBS) and Verifiable delay functions and attacks (VDFs) to make the network more resilient.

The Shanghai upgrade

In between the Merge and the Surge, the Shanghai upgrade is expected to go live. While the Ethereum community are still finalising the details, the upgrade is expected to implement a number of eagerly awaited functions. This includes withdrawals for staked ETH and highlighting Coinbase addresses for transaction executions.

The Merge is not the most important upgrade

The Merge is a momentous event, but it is not the most impactful one from an investor or user’s standpoint. The reduced energy consumption from the change in consensus mechanism does not affect users directly, and the reduced ETH supply will only happen over time.

The Shanghai Upgrade

The Shanghai upgrade is expected to enable withdrawals for staked ETH (stETH), which is one that asset holders have been looking forward to. Unfortunately, stETH has not been receiving a favourable rap in the past few months thanks to the crypto contagion that started with the collapse of Terra, which ended in stETH’s price being de-pegged from Ethereum’s price.

The Surge

Another more impactful event than the Merge is the Surge. With sharding on the Ethereum network becoming a reality after the Surge, we can expect the network to scale up easily and handle much more transactions on-chain than it can do so at the moment.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
CoinPasar

CoinPasar

We aim to familiarise Singaporeans with the emerging technology of blockchain technology and digital crypto assets in the face of a global ec