Ethereum’s Merge (previously known as ETH 2.0) is a highly anticipated update for users of the Ethereum (ETH) network. This update promised improvements to specific functions within the network, such as changes in shard chains, a new blockchain (beacon chain), and a change to the Proof of Stake (PoS) consensus mechanism.

All of these will be deployed on the network with extreme care and planning. In fact, this is just the beginning of the most significant change that Ethereum - one of the most famous cryptocurrencies in the whole world - will undergo.

These updates on Ethereum 2.0 can change not only the cryptocurrency itself but also the crypto sector as a whole.

A Background on Ethereum

The development of some technologies in the form of decentralized applications (dApps) has grown over the years. In addition, other blockchains grow daily, all thanks to the launch of Ethereum, which was revolutionary in the market. If you imagine any Decentralized Finance (DeFi) innovation, you will probably think of Ethereum as this cryptocurrency implements them in general terms.

Over the years, some problems have arisen with the Ethereum network. Transactions increase day by day, and this ends up bringing a high cost of realization. With this, transactions become more expensive. In other words, a solution was needed to make Ethereum sustainable again.

So the Ethereum 2.0 project was created, a major update with several innovative proposals that could change how the cryptocurrency market presents itself worldwide. ETH 2.0 proposals should address issues that affect the cryptocurrency and the projects that use ETH’s technology.

What is Ethereum 2.0?

Source: Ethereum Foundation

Ethereum 2.0, also called Serenity or Eth2, is a massive upgrade of the Ethereum cryptocurrency network. It aims to change, among several things, the scalability of the network, improving several factors such as: network speed, scalability, and efficiency, all this without ending all decentralization and security.

The launch of the new Ethereum has been planned for a long time carefully so that nothing goes wrong. It turns out that the great need is to scale the blockchain in the most secure and decentralized way possible.

Yes, it can be quite a challenge. Ethereum 2.0 can be the solution to all problems, making the implementation of all features more accessible and more practical. Differences will arise and please users in a new and unexpected way.

The Merge - from PoW to Pos - is the most significant upgrade in the history of Ethereum, and extensive testing and bug bounties are being undertaken to ensure a safe transition.

Ethereum vs. Ethereum 2.0: Proof of Stake (PoS) vs. Proof of Work (PoW), Sharding and Beacon Chains

Ethereum and Ethereum 2.0 have natural differences, such as Proof of Stake (PoS) vs. Proof of Work (PoW), sharding, and beacon chains. These concepts are vital for understanding why The Merge is relevant.

Proof of Work (PoW) and Proof of Stake (PoS)

Ethereum was initially designed to keep its network updated and secure by rewarding the people who mine cryptocurrency. As time went on, PoW was not sustainable based on where ETH could go, as it would require more and more mining machines for the blockchain to grow—harming the value of mining and the environment itself.

The Proof of Stake (PoS) could solve all this, and that is where the Ethereum Foundation is heading. This replaces the “skin in the game” computing power. If you have at least 32 ETH in your Exchange wallet, you can be a validator and receive staking rewards depending on each transaction.

Sharding

People who want to access the Ethereum network do it through a node. This node stores copies of the entire network, so it downloads, calculates, processes, and stores every transaction made since the first ETH. Users don’t need to run a node for every transaction they make.
Shard chains are common, not unlike other blockchains. The difference is that it only contains specific subsets of small parts of the blockchain, making it easier for a node to manage parts of the Ethereum network rather than the entire network. So, the overall capacity increases a lot.

Beacon Chain

Shard chains work in parallel with each other, simultaneously. For this, they must be synchronized, so they are all aware of each other’s changes. The beacon chain handles this by providing information to all shard chains in parallel.
This new chain plays a huge role in Ethereum 2.0. Without the beacon chain it would be impossible to share the information of the shards, and so there would be no scalability. Ideally, this will be the first feature to appear in Ethereum 2.0.

From Ethereum 2.0 to Consensus Layer – Why Was This Change Made?

With significant changes came significant responsibilities, and a new nomenclature took place. In a blog post on the Ethereum Foundation’s official website, they presented new ways to refer to the Ethereum 2.0 update. As stated:

• Eth1 → execution layer
• Eth2 → consensus layer
• Execution layer + consensus layer = Ethereum

This was done to reinforce the idea of ​​a drastic change. Not continuing with the old name could be a way to make people understand the new Ethereum. The purpose of Ethereum has changed, so it is only fair for its title to accompany this change.

Impacts of Ethereum 2.0 (Consensus Layer) Update and Changes

Some essential changes will come along with the update, as mentioned earlier. Users must understand and follow the differences of the whole project. For this, you can check out some of the most significant changes.

When this update is ready, the sharding mechanism may have more transactions per second than before. The blockchain will be divided into several parts so that they can be operated simultaneously through the beacon chain. With this, a node handles fewer data at once, being faster. In addition, decentralization on the Ethereum network increases significantly, helping blockchain security grow even more.

Transactions are expected to drop even further, helping the network to develop. In addition, the environment will benefit much more from our way of obtaining ETH, as it will no longer be necessary to mine intensively, saving machines and reducing pollution.

Conclusion

The Merge from the Proof-of-Work consensus mechanism to a Proof-of-Stake on Ethereum is being highly anticipated by the Ethereum Foundation. It is one of the main catalysts for determining the future of cryptocurrencies and where projects will be headed.

Over the years, several tests to validate this change and implement it officially were made on the network. The team is still on its way to launching it officially without incurring risks that could affect the whole crypto ecosystem. Overall, the update will be advantageous and could be an excellent example for all cryptocurrencies. Ethereum grows and innovates day after day.