The Ethereum Merge Fully Explained

With the Merge upgrade, Ethereum mainnet switched its consensus mechanism from proof of work to proof of stake.

Through the Merge, Ethereum aims to improve scalability and implement an energy-efficient mechanism. In September 2022, the Merge was successfully applied to Ethereum mainnet together with the Beacon Chain.

The Merge is one of the major upgrades in the Ethereum ecosystem, which also include the Surge, the Verge, the Purge and the Splurge.

Introduction

Since its launch in 2015, Ethereum has established itself as a popular decentralized computing platform and supports countless blockchain projects. However, it lacked the scalability needed to meet global demand. To solve this, the Ethereum team proposed a series of upgrades: the Beacon Chain, the Merge, the Surge, the Verge, the Purge and the Splurge.

Why Ethereum Needed an Upgrade

Blockchains are generally designed to be decentralized rather than having a central party hold authority. A decentralized blockchain requires no permission or trust, and because it has no single point of failure, it offers excellent security.

As a blockchain grows in popularity, the platform needs to process transactions faster, which is also called scalability. Otherwise, pending transactions can pile up and cause network congestion. This usually leads to higher transaction fees.

However, achieving security and scalability at the same time while staying decentralized can be difficult. Vitalik Buterin described this as the scalability trilemma. The blockchain trilemma refers to the difficulty of balancing three properties: scalability, security and decentralization.

For example, Bitcoin is designed so that one block is mined about every 10 minutes on average. This is adjusted automatically by the mining difficulty protocol. Bitcoin is designed to be very secure, but because each block can hold only a limited number of transactions, the network can become congested when demand surges.

To overcome these limits of proof of work, the Ethereum team proposed Ethereum 2.0 (ETH 2.0).

What the Ethereum 2.0 Upgrade Implements

Ethereum 2.0 consists of the existing Beacon Chain, the Merge, the Surge, the Verge, the Purge and the Splurge. Once all the upgrades are in place, the new Ethereum blockchain will continue to provide a service that is scalable, secure and sustainable while remaining decentralized.

1. The Beacon Chain

The Beacon Chain, also known as Phase 0, is the first of the Ethereum upgrades. It launched on December 1, 2020 and introduced proof of stake to the Ethereum ecosystem. Users can interact with the Beacon Chain by staking ETH or by running a consensus client to help secure the network. The Beacon Chain ran in parallel with Ethereum mainnet.

2. The Merge

The Merge is Ethereum's next upgrade aimed at solving the scalability problem. Simply put, it combines the two independent chains in the Ethereum ecosystem: the execution layer and the consensus layer (the Beacon Chain).

In September 2022, Ethereum mainnet integrated the proof-of-stake system implemented on the Beacon Chain. The Ethereum network has now completed its transition from proof of work to a proof-of-stake mechanism.

3. Changes to ETH Rewards

Existing ether (ETH) remains unchanged after the Merge. After the Merge, about 13,000 ETH was mined and distributed per day. However, mining rewards no longer exist, and staking rewards have decreased to 1,600 ETH per day.

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Upcoming Upgrade Schedule

There is no official announcement yet, but the sharding upgrade is underway after the Merge, and the Surge, Verge, Purge and Splurge updates will follow in turn.

Sharding is a technique for increasing Ethereum's transaction throughput: it speeds things up by having each chain hold only part of the blockchain's data. With the data management that shard chains provide, nodes can verify transactions more efficiently.

Wrapping Up

The Merge is the second of the Ethereum network's major upgrades. It was presented as a scaling solution for better scalability and was successfully carried out in September 2022.