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A Detailed Explanation of the Ethereum Merge

ETH PoW

There are so many misconceptions about the Ethereum merge yet the event remains one of the biggest in crypto history. Ethereum is the second largest cryptocurrency and the most popular among developers as the world’s first programmable computer. However, there is a parallel network known as the Beacon chain developed in 2020 and has been running since the merge. The genesis network of the Ethereum blockchain which everyone has been using was launched in 2015 and is based on a proof-of-work algorithm known as Ethash.

Using Ethash, miners add blocks to the blockchain by hashing through incrementing a nonce along with the block header until a target set by the blockchain is reached. Reaching this target means that the block is solved and the miner earns the reward of 3 ETH for solving the block and publishing new transactions to the network.

Ethash is different from sha256, a Bitcoin mining algorithm because the difficulty is memory bound which makes it ASIC resistant and less prone to the concentration of power. With Ethash, the devices you use in the mining process make a little difference unlike sha256 where accumulating ASIC miners can give individuals an unfair advantage.

Even though most new blockchains such as Binance Smart Chain, Solana, and Avalanche are popular for using some sort of proof-of-stake mechanism, The original idea was already discussed in a Bitcoin forum by a group of anonymous contributors in 2011. The original idea was meant to make transactions, faster, and introduce the idea of delegation. The first implementation, however, was in PeerCoin which was started as a hybrid proof-of-work/proof-of-stake mechanism.

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What is the Merge?

The merge is the fusion of the execution layer of Ethereum which has been in existence from the beginning with the consensus layer known as the Beacon Chain. With the merge, the network can be secured by ETH instead of energy-intensive mining to solve a block on the proof-of-work layer. The merge also helped Ethereum increase the security, sustainability, and scalability of the network.

When the Beacon chain was released, it worked in parallel with the Ethereum mainnet where all transactions and network states were secured by proof-of-work. Both chains eventually started functioning as one after the merge with proof-of-work replacing the old proof-of-stake mainnet. You can think about it as a new update to existing software that is meant to improve the overall user experience of the software.

The current Ethereum mainnet we all used until September 15th, 2022, started in 2015 with all the relevant data such as transaction balances, smart contracts, and accounts on the network existing on top of this network. Developers on the Ethereum network who have been working to implement the switch from proof-of-work to proof-of-stake released the initial version of the Beacon chain in 2020. All that while, the Beacon chain ran as a separate layer that agreed on account balances and active network validators to reach consensus. These developers along with other participants tested the Beacon Chain extensively, they established that it was due to consensus on data from the real world.

Since the merge, all data on the Ethereum network, including the execution layer, transactions, and account balances rely on the Beacon Chain as the primary network consensus engine. The merge also marked the switch to the Beacon Chain as the engine for block production, stopping mining as the means for block production, and validation on Ethereum.

With this development, proof-of-stake validators assumed the responsibility for validating and processing transactions on the network. It is also important to note that Ethereum did not lose anything as a result of the merge. All states and transaction history also moved to the Beacon Chain.

Implications for Solidity Development

The merge was meant to have the least impact on Ethereum application developers. Although there are some important points such as the architecture roadmap and the post-merge architecture that developers must understand. In the proposal diagram for the merge, Wei Wang separated the merge into layers which include the main chain for staking. In the diagram, the Beacon Chain provided random numbers, while the Shard Chain provides data, and the virtual machine handled states and execution results.

Moving in three phases from 0, the first phase was meant to bring the Beacon Chain, while the next stage marked the launch of data shards, and the next, the addition of virtual machines to enable computation on each shard.

The realization of the delay in the proposed ETH2.0 roadmap coupled with the increasing need for a better Ethereum network following the proof-of-work backlash lead to further research initiatives to speed up the process. A proposal at the Devcon Conference in 2018 was to remove the untouched states from Ethereum and have the existing EVM state launched as shard 0 of the ETH 2.0 system.

The Early Merge Proposal meant that the application could transition easily, and Ethereum could move to proof-of-stake without migration. To reduce the deployment work, Danny Ryan proposed using ETH1 and ETH2 client relationships to streamline the deployment work and deliver a post-merge system using existing clients already tested on the Mainnet. These proposals led to a 99% realization of phase 0 in the later part of 2020.

Following a clear proposal for an executable Beacon Chain, the Rayonism hackathon saw clients prototyping an executable Beacon Chain in a four-week hackathon. In a couple of weeks, all ETH1/2 clients became transaction-running hybrid post-merge clients reaching consensus on the Beacon Chain. The development leads to the repurposing of the ETH1 nodes as the execution layer and ETH2 as the consensus layer of the Ethereum network.

In terms of the block structure, the Merge introduces only minimal changes with the former content of proof-of-work blocks becoming components of the proof-of-stake Beacon Chain. The new consensus layer supersedes the previous execution layer, with Execution Payloads, the post-merge instance of blocks running on the Beacon Chain.

Although the execution layer remains relevant with changes to the block field. Uncle blocks will be set to zero because they are not possible on the Beacon Chain. Difficulty and nonce features will be set to zero, while mixHash will instead contain the Beacon Chain’s Rando value. The blocktime on Ethereum will also be lower at 12 seconds, with more reliable block finality from ⅔ majority validation.

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Implications for Smart Contract Development

Smart contracts development on Ethereum remains the same the only points where this may be affected at the speed of execution which relates to blocktime. The Beacon Chain means less energy consumption with the merge effectively reducing the energy consumption of Ethereum by up to 99.5%.

The good thing about this for developers is that due to the much promoted green chain mantra. There will be bigger institutional adoption and broader public participation in the network. Energy experts and the world's biggest goodwill organizations have long weighed in on the potential impact of proof-of-work mining on the environment. At some point, some of the biggest holders of cryptocurrencies have dumbed the asset due to energy concerns and the need to be responsible for protecting the environment.

As former detractors and leading firms in traditional tech and finance industries start to consider Ethereum due to its efficiency, the broader community will benefit from the price impact, and developers will enjoy being a part of a thriving ecosystem. These developments will lead to loops of adoption and growth encouraging the creation of newer use cases for smart contracts on Ethereum.

What Everyone Must Know

First, it is important to keep in mind that the complete history including transactions, balances, and states on Ethereum from day one has not changed as a result of the merge. Running third-party endpoints, execution points, and consensus points to obtain data no longer work after the merge. Stakers who run their own nodes and infrastructure must authenticate both consensus and execution clients with shared JWT secrets. They must also set a fee recipient address to receive earned transaction fees and tip/MEV.

If a node does not synchronize the consensus and execution client, it will be considered offline, until both layers are determined to be online. If a node does not set a recipient address, such a node will miss out on earned fees or tips and MEV which they would otherwise earn from blocks proposed by their validators.

Post-merge, all validations of blocked gossiped on the Ethereum Network and those in the ExecutionPayload depend on the Beacon Chain. For this reason, all nodes on Ethereum need an Execution and consensus client which works together using an API engine. The API needs a JSON Web Token secret which enables this secure communication.

Even though the merge is a huge event, it only takes Ethereum one step towards achieving full scalability and security. It is therefore a part and not the final destination of the Ethereum blockchain. There is also a huge misconception about the amount of ETH required to be a node on the Ethereum blockchain.

To clarify the 32ETH requirement problem, participants must note that there are validator and non-validator nodes on the Ethereum blockchain. Validator nodes are not many, and they commit their resources to secure the network by sending votes known as attestations in favor of gossiped blocks on the network. Non-validator nodes only require 1-2 terabytes of storage and an internet connection to validate nodes on the network. They do not propose blocks but secure the network by ensuring the accountability of validator nodes or block proposers. Anyone can run a node that produces no block on Ethereum thanks to proof-of-stake enabled by the Beacon Chain.

Transaction Fees and Staking Withdrawals

The merge did not directly change any of the parameters that affect the capacity of the network or its throughput. Since gas fees on Ethereum are determined by the forces of demand and supply on block space, there is no guaranteed reduction in fees occasioned by the merge. By implication, rollups like Optimistic, and zero-knowledge-based rollups remain relevant in the reduction of transaction fees and the increase of network throughput.

Another misconception about the merge is staking withdrawals. The Ethereum merge did not make it possible for stakers to withdraw their staked ETH. Staked Ethereum will remain locked until a future upgrade known as the Shangain upgrade, which is set to be released in the future. What obtains at the moment is that validators can continue to earn MEV/Tips as rewards for validating transactions on the Ethereum network.

ETH PoW

New ETHW tokens were issued following the merge. If you hold ETH on a decentralized Web3 wallet such as MetaMask or Wallet Connect before the merge, you should have an equivalent amount of ETHW tokens in your wallet. To find your tokens simply add the new network to your relevant wallet, using the correct RPC or input ETHW on the popular website Chainlist.org, and you will find your tokens.

Let’s Help You Leverage The Benefits of ETHW Through Blockchain Application Development

Working with our talented blockchain developers lets you focus on other sides of the business while we take care of the technical part. From simple finance DApps to complex gaming, NFT marketplaces, and other blockchain mobile and web applications, you can trust in us as your go-to blockchain development company for a complete development package.

There will be mass adoption of Ethereum after the merge, even though it is not established at the moment that this will be the case. With the merge, Ethereum has successfully resolved one of the biggest arguments put forward by blockchain cynics who are head over heels in love with traditional systems for transitions and development.

As this massive move occurs, we remain positioned to help you build and scale your blockchain applications on a green Ethereum. As Ethereum development takes a new turn it would not be expedient for any business to take the backseat in innovation. Yet a lot of businesses are finding it hard to understand the concept of blockchain in the first place.

We have been building all kinds of decentralized applications and blockchain solutions across industries on various blockchains. From healthcare to logistics, supply chain, agriculture, automobile, education, fashion, entertainment, banking, and gaming, the blockchain is changing the way things work in ways that we have never imagined.

Our smart contract development solutions are focused on implementing these complex possibilities and use cases without errors on the Ethereum blockchain, and back-testing where necessary to discover potential backdoors before applications go live. We also have a dedicated research, security, and upgrade team ready to transform your ideas into an app in the best way possible. Allow us to work with you today to bring that idea of yours to life or maintain an existing system through integrations or upgrade.

Conclusion

The merge is one of the most anticipated events in the crypto space like the Bitcoin halving, there has been a lot of craze about it but it is not the final improvement on the Ethereum blockchain. With the merge comes a lot of benefits for users of the Ethereum network such as staking rewards through validator nodes, and a lot more with increased adoption of a green Ethereum.

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