Ethereum has finally switched its underlying consensus model to proof-of-stake (PoS), following the culmination of seven years of planning by the blockchain’s core developers.
The protocol’s Merge triggered at6:43 am UTC (2:43 am ET)on Thursday, Sept. 15, as the blockchain reached a Total Terminal Difficulty of 58,750,000,000T. Ether traded around $1,588.12 after the energy-saving software upgrade, Blockworks Research data showed.
After 13 tense minutes, Ethereum developers and researches confirmed that new blocks, or slots as they’re called on proof-of-stake Ethereum, were being produced and finalized.
Over 40,000 live viewers tuned into the Ethereum Foundation’s livestream at the time of the event.
Perhaps the most anticipated event in the crypto world, the Merge has been one of the most difficult engineering feats undertaken by the industry, according to analytics firm BitOoda.
“It represents switching the underlying consensus engine of the blockchain while Ethereum continues to run and support the $100 billion+ DeFi, NFT and app economy without a hiccup,” Vivek Raman, BitOoda’s head of PoS said.
Its upgrade also aims to inadvertently silence critics of the industry’s energy consumption, which has received some of the blame for contributing to climate change.
The Ethereum Foundation estimates that the merge to PoS dramatically reduces the blockchain’s power consumption by 99.95%.
“So many people think that all blockchain projects are terrible for our climate by design,” Lia Holland, campaigns and communications director at non-profit advocacy group Fight for the Future said in a statement.
“The Ethereum Merge shows real action from one of the largest chains to reduce its energy usage to 1/1000th of its former consumption.”
Enabling PoS will also drop new supply issuance of ETH by 90%, and some proponents claim the impact is equal to three Bitcoin halving events. This means that the number of ether mined per day will reduce from 13,000 to about 1,600 per day.
Previously, a single transaction on Ethereum required enough energy to power an average US household for an entire week. Post-merge, that inches closer to just boiling a kettle, according to Juunu Salovaara, head of platform development at carbon credits crypto firm Likvidi.
“In terms of energy consumption, it will now sit alongside other protocols that are considered sustainable, such as Tezos, Solana and Algorand,” he said. “Given it’s still the second biggest blockchain in the world by a big margin, it presents an opportunity for sustainable blockchain projects looking for a home.”
And the biggest misconception about the Merge is that it will lower gas fees. “This is not true,” said Steven Walbroehl, Co-Founder & CTO of Halborn. “It is a change of consensus mechanism, not an expansion of network capacity, that would result in lower gas fees.”
Alex Connoly, chief technology officer of NFT marketplace and Ethereum layer-2 scaling solution Immutable X agrees.
“Currently, the primary scalability bottleneck on Ethereum’s total transaction processing is the cost of data availability for rollups,” Connoly said in a blog post Monday. “The near-term (2023) scalability updates are mostly mechanisms to reduce this cost.”
Those include a proposal to reduce the cost of data through the storage of data blobs — a data type that holds binary data — on beacon nodes for a short period of time.
The other would be to reduce the cost of data by allowing nodes to store only a subset of data via sharding, Connoly said. Sharding for Ethereum refers to the process of spreading the network’s load and breaking up the data across 64 separate shards.
But a definitive time on when that may actually come about is anyone’s guess given Ethereum’s slow and steady approach to development.
A long time coming
Ethereum first marked its intention to switch to PoS soon after its inception in 2015.
The transition has been marked by constant delays which, at the time, were touted as affording the team more time to prepare, much to the chagrin of the network’s impatient userbase.
It also gave Ethereum founder Vitalik Buterin enough time to compile various writings through his learnings in those years. Those will be published in a book later this month.
The Beacon Chain, the core mechanism of the new network, finally launched in December 2020. That was one of the first milestones leading up to the event. Since then, Ethereum has been running both a PoS chain (Beacon Chain) and a proof-of-work (PoW) change.
Goerli — Ethereum’s third and final testnet — was one of the last hurdles for the chain to jump through before its final transition to PoS, doing so at the start of last month.
The completion of the Merge not only signifies the integration of both chains, but is a major symbolic win for those that have contributed to its codebase over the years.
Because the Beacon Chain has been running for almost two years — there have been mainnet shadow forks and 3 live testnet merges — the duration and frequency of the testing greatly increased the likelihood of success, Mark Connors, head of research at 3iQ Digital Assets, told Blockworks.
What are the risks?
Some major risks to the Merge included any unforeseen technical problems or a material change in gas fees. And while those that have played an important part in the network’s stability as a PoW concept, some are less accepting of the change.
The Controversial Ethereum PoW fork (ETHW), expected to formally launch within 24 hours of the Merge, is one such concept challenging the transition to PoS which threatens to put miners out of business.
Still, most of the industry intends to move ahead with minor issues able to be easily remedied by developers post-Merge, analysts say.
“The Ethereum foundation’s $1 million reward for programmers that found bugs is one example of the amount of focus and energy on nailing this effort,” Connors said.
A great deal has now fundamentally changed for ETH token holders and the Ethereum network. Debate around whether Ethereum could flippen Bitcoin will continue in the months after the Merge. For now, that remains to be seen. Find more Blockworks articles covering the Ethereum Merge here.
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