Ethereum’s merge to proof of stake: all you need to know

Before the merge, Ethereum was a proof-of-stake consensus network, and in September 2022, Ethereum made a full transition to the proof-of-stake consensus model. This move had always been in the original Ethereum project roadmap, which is why this transition was important not only to the Ethereum community but also to the entire Crypto community.

The main purpose of the merge was to transition Ethereum from the proof of work consensus mechanism to the proof of stake consensus mechanism. As explained in previous articles, proof-of-work miners secure the network by purchasing and running the hardware required for the model. They compete against each other for the opportunity to verify block transactions, and if successful, the miner is rewarded with new cryptocurrencies and a portion of the transaction fees.

In the proof of stake model, validators secure the network by staking a certain amount of ETH, for the chance to be selected to validate the block transactions. Because the nodes are not in competition with each other, this system consumes less energy compared to the proof of work mechanism. Therefore, the transition to proof of stake makes the Ethereum network more energy efficient, secure and scalable.

Limitations of the present Ethereum mainet

In addition to the outstanding concerns about the environmental sustainability of the proof of work consensus mechanism, let’s explore the other two limitations currently that were experienced by the network prior to the merge.

Scalability

Before the transition, the Ethereum network could only process 15 transactions per second, which made it difficult to onboard new millions of users and launch more DeFi applications. After the merge, the network currently processes over 1000 transactions per second.

How was this achieved: Sharding and Docking

The scalability of Ethereum was achieved through a process called sharding

To explain the concept of Sharding, let’s use the highway analogy. Imagine that you live in a city with only one major highway. This means that every morning, your ten minutes commute to work becomes one hour long due to the heavy traffic. To address this issue, the city council decides to build 63 new lanes to ease the congestion. Compared to the Ethereum network, these new lanes are called shards. They split the Ethereum infrastructure into smaller bits so that each shard operates independently of the other to achieve scalability. The shards will be used to store and retrieve data but will not be able to verify transactions like the current Ethereum blockchain. Eventually, the current blockchain will become one of the 64 shards in a process called docking. This will signify the end of the merge.

Security

Post merge, the Ethereum network is more secure against all forms of attacks including the 51% attack - a scenario where an attacker can take control of the majority of the network.

How was the merge done?

Instead of being done in one big risky step, the transition was designed to happen in 2 major major steps;

Step 1: The Beacon Chain launch

This first step was successfully completed in December 2020, when the Ethereum team created a separate parallel proof-of-stake chain that could be tested in production for some time without having a direct impact on the already existing proof-of-work network. This was also done to provide stakers enough time to stake a significantly large amount of ETH that would be needed to secure the network at the time of the merge.

The Beacon Chain selects and coordinates the stakers in the network, assigning them to shards they need to work on. It also facilitates communication between shards by receiving and storing shard transaction data accessible by other shards. This gives shards a snapshot of Ethereum’s state to keep everything up-to-date.

Step 2: The Merge

This is the second step in the transition process which merged the beacon chain with the Ethereum mainet.

The merge has reduced the overall power consumption required to secure, the network by almost 99.95%. It also affords Ethereum the following benefits.

1. Making the network more ESG compliant and appealing to regulatory institutions who want to explore the ecosystem
2. It  makes Ethereum more appealing to the NFT artists and gamers concerned about the environmental impact of proof-of-work mining
3. After the merge, the POW system ceased to exist. This significantly reduced new ETH issuance.
4. The merge makes it easier for more individuals to join the network as validators instead of joining centralized mining pools. This will increase the security of the network and ensure that the network remains decentralized.

When was the date of the merge?

Early in June 2022, the merge was successfully completed on the ropsten testnet - one of the final testnets to experience the Beacon chain merge. The final merge happened on September 15th 2022. 

What happened after the merge?

The merge represented the official switch from the previous Ethereum mainet to the beacon chain as the engine of block production. Mining no longer takes place, and validators have fully assumed the role of validating transactions and proposing new blocks. The entire transaction history has been transferred without loss. With the merge, it was goodbye to proof of work Ethereum, and hello to the more environmentally friendly, secure and scalable Ethereum.