Post-Merger Era: Will Ethereum Surpass BTC?

"The Ethereum merger is complete! This is an important moment for the Ethereum ecosystem. Everyone who helped make the merger possible should be very proud." After the completion of Ethereum's important milestone merger, founder Vitalik Buterin (V God) posted a message on the social platform to celebrate.

At 2:45 pm on September 15, the long-awaited Ethereum "Merge" was completed, completely transitioning from PoW to PoS. What will happen to Ethereum after this?

Route map next stop

Crypto lending platform Nexo says the new PoS consensus mechanism has no direct correlation with network capacity. Fees, both gas fees and NFT minting, will not be affected, at least in the short term. Nonetheless, it is important to note that the #Merge is a key step in this regard and lays the foundation for further significant reductions in gas fees. Transaction speeds will remain largely unchanged. Although some minor changes are expected, end users will most likely not notice them. The merger is not the last step for Ethereum. On the contrary, according to Vitalik, the network will be about 55% complete after the merger.

So, what’s next for Ethereum?

The roadmap shows that after Merge, Ethereum will have four more stages: Surge, Verge, Purge and Splurge.

The Surge:

By dividing the entire blockchain network into smaller blocks, multiple shard chains will be able to conduct transactions and verifications simultaneously in the future, improving the efficiency of the entire Ethereum network.

The Verge:

Introducing the design of Verkle Trees to optimize data storage on Ethereum.

The Purge:

By removing historical data and eliminating technical debt, validators no longer need to use large amounts of hard drive space to perform verification work.

The Splurge:

The coordination of the upgrades across four different parts is designed to mitigate the occurrence of bugs and ensure the network can operate smoothly.
However, the most important thing at the moment is the upcoming Ethereum Shanghai upgrade.

Previously, several major updates were planned for the Shanghai upgrade:

EVM Object Format (EOF): Proposed by the Ipsilon team, it improves the EVM without breaking current contracts, provides new features for contracts deployed using specific identifiers, and allows existing contracts to continue running.

Beacon Chain Withdrawals: EIP-4895 enables the beacon chain to process all or part of the withdrawals and account for them in the execution layer, allowing validators to withdraw staking rewards and maintain the 32 ETH stake required for validators.

Second-layer fee reduction: Since the existing second-layer solution verifies transaction data at the execution layer (L1), most of the end-user fees still come from the data storage at the execution layer. Developers have proposed two solutions:

Reduce call data costs: Through EIP-4488, the storage cost of L1 call data (CALLDATA) is reduced from 16 gas per byte to 3 gas.

Sharding: EIP-4844 brings Ethereum closer to deploying full sharding. This proposal introduces the Blob sharding transaction type, which is similar to mini-sharding. All nodes need to verify the Blob data, but the data blocks are only accessible for a limited time rather than permanently stored.

Other improvement proposals:

EIP-3651: Reduce the gas cost of accessing COINBASE addresses.

EIP-3860: Limit the size of initcode and introduce Gas Metering.

EIP-3855: Reduce contract code size.

Ethereum core developer Marius Van Der Wijden said on the 16th that core developers may agree to solve the issue of ETH withdrawals in the next Shanghai upgrade, but the specific content of this upgrade is still unclear. If the Shanghai upgrade contains too much content, it may affect the progress of testing. For example, if there are 10 changes in the Shanghai upgrade, each change needs to be tested separately, and it is also necessary to test how different changes interact and affect each other. This means that once the number of functions included in the Shanghai upgrade increases, the testing workload will increase exponentially, eventually leading to a delay in the Shanghai upgrade date. Since the Shanghai upgrade will solve the issue of ETH withdrawals, any delay may affect the interests of stakers and validators.

Surpassing BTC?

After the merger, the Ethereum narrative has changed, and its token economic model has changed dramatically. ETH supply growth has dropped significantly, and the deflation model has started. As RaoulPal, founder of macro research agency RealVision, said on his social platform, PoS will bring positive changes to Ethereum. The biggest narrative of the Ethereum merger will be the benefits, not the supply reduction, and the benchmark yield it provides will change everything.

By this measure, Ethereum is generating more revenue and profitability, greatly improving its competitive position with Bitcoin.

ARK Invest's new chief futurist Brett Winton said that there is a perception in the market that Bitcoin and Ethereum are competing with each other, which is not true, and is actually even less true after the Ethereum merger. Bitcoin itself is the most likely to win the currency revolution. The conservatism of the protocol actually means that over time, it is very likely to replace second-tier currencies as a medium of exchange. PoW is a more powerful decentralization mechanism relative to PoS. Therefore, when Ethereum moves to proof of stake, there will be all kinds of potential benefits and interesting things, but it will actually make the competitive space more isolated.

Bankless wrote: "BTC is the most credible neutral asset. Over the years, it has withstood dozens of failed attempts by organized groups to unilaterally modify Bitcoin's underlying code and increase its node size. BTC's reliability has become its core intrinsic value proposition. However, Bitcoin's reliability does not mean that the asset will maintain its value or be denominated in purchasing power or fiat currency. On the contrary, Bitcoin's core design is not programmable, there is no added value for holders, and its mining cost structure leads to significant value leakage. This is why for Bitcoin, reliability does not mean investability."

Bankless points out that every major catalyst in the crypto market since 2016 has been driven by the promise or realization of web3 applications that Bitcoin does not support. So far, BTC has only benefited from the huge wave of "actual useful things" created by the Ethereum community (and a few others). This is why BTC as an investment is unsustainable, why transcending BTC is warranted, and why it is good for crypto - because it will eliminate the uninvestable asset that is the leader of our industry.

However, there are also some dissenting voices in the market.

Paolo Ardoino, CTO of Tether and Bitfinex, said today that Ethereum still cannot be compared to Bitcoin because its claims keep shifting. Ardoino said: "Bitcoin is a form of money, while Ethereum is stuck between claiming to be a form of money and being a platform, but ETH cannot compete with Bitcoin in terms of money because there is no fixed supply, and it is not yet a true world computer because it has a shared global state and is therefore too slow to scale."