Is everything alright for Ethereum after “The Merge”?

According to the latest data from the official Ethereum website, the total stake of the Ethereum Beacon Chain has recently exceeded the milestone of 10 million ETH. The crypto community believes that the Ethereum 2.0 Beacon Chain will complete its integration with the Ethereum 1.0 network this year, also known as "The Merge". However, for the Ethereum community, can "The Merge" really solve many problems on the current network? Let's analyze it further in this article.

As we know, the Ethereum Foundation has phased out the terms "Eth1" and "Eth2", replacing them with "execution layer" and "consensus layer" respectively. When the consensus layer is ready to replace the current mining system, the two layers will be merged into regular Ethereum. So what is the future direction of Ethereum after the merger? In a recent interview, the co-founder of Ethereum explained some of the terms mentioned in the Ethereum blueprint.

“Phase one is The Merge. Phase two is The Surge — being able to shard and scale something.”

Current problems with the Ethereum network

The reason why Ethereum is in urgent need of upgrading is mainly due to the many problems that exist in the current operation, which seriously hinder the progress of the Ethereum blockchain. Here are some of the key problems of Ethereum:

1. High gas fees: “Gas” is a fee paid to miners who provide computing power to the network. Gas fees are based on the level of demand for Ethereum network resources, and their market price is variable. The higher the demand, the higher the gas fee. The higher the gas fee someone is willing to pay, the faster the transaction will be executed. This means that when an application on Ethereum soars in popularity, the gas price may be prohibitively high, and sometimes the cost of executing a transaction is even higher than the price of the trading token. For example, at some point, the gas fee spent on purchasing a low-cost NFT may be higher than the value of the NFT itself.

2. Consumes a lot of electricity: Currently, to establish consensus on the Ethereum blockchain, nodes on the Ethereum network must perform complex calculations and give answers, which is called "proof of work." The more Ethereum is used, the more computing work is required to verify its blockchain, which will cause nodes on the network to consume more electricity. This has also led to criticism of the Ethereum network - the operation of the Ethereum network will cause pollution and damage our natural environment.

3. Disk space problem: As the Ethereum network continues to grow, it becomes increasingly difficult to run nodes. This is because the historical records on the Ethereum blockchain take up more and more disk space, which undoubtedly increases the difficulty of running a full node (by increasing the cost of running a node), thus limiting the number of nodes on the network.

4. Network congestion: When computing demand increases, the low efficiency of Ethereum will cause network congestion in the communication between nodes, thus slowing down the execution of smart contracts. Due to this congestion, applications running on the Ethereum network cannot be designed to be too complex.

What will change after “The Merge”?

Vitalik Buterin pointed out that when the merger of Ethereum’s mainnet, which handles transactions, and the beacon chain, which handles staking, is completed, all accounts, contracts, and transactions will run on the PoS chain instead of PoW.

“We’ve had the Kintsugi testnet up and running for six weeks now, and the only big thing that hasn’t been tested yet is optimistic sync.”

As we know, the Ethereum Foundation has received a lot of attention since the announcement of the Kintsugi Merge testnet in December last year. The main purpose of the testnet is to test and find out what problems still exist in the merged Ethereum.

As the Ethereum mainnet merges with the beacon chain, Vitalik Buterin is actually more focused on the third phase, "The Verge". He explained that this phase is about Verkle trees, a technology that makes it easier to verify the Ethereum chain and run nodes. Vitalik Buterin added:

“The fourth phase is The Purge, in which some historical things and things that we used before but are no longer needed will be deleted from the protocol, which can make the Ethereum protocol simpler.”

It can be said that the major upgrades in 2021 paved the way for the future development of Ethereum. According to Vitalik Buterin, the Berlin Hard Fork and the London Hard Fork were the two most important upgrades. According to Vitalik Buterin, the London Hard Fork EIP-1559 upgrade not only reduced transaction fees, but also increased transaction speed.

Since the London hard fork, Ethereum appears to have destroyed 1,950,577.9 ETH as of press time. Not only that, Ethereum will also be preparing for the Ethereum "difficulty bomb" (a new mining mechanism to increase mining difficulty) to be launched in June 2022.

“Of course the difficulty bomb can be delayed if necessary, but we still have some time.”

As you may recall, the date for launching the EIP-4345 difficulty bomb had been postponed. It was originally scheduled to be launched in December 2021, but was later postponed to May 2022. However, as Ethereum upgrades, PBS seems to be the focus of Vitalik Buterin. Vitalik Buterin explained that in the long-term plan of Ethereum, "Phase 5 is The Splurge, which includes all other important upgrades such as account withdrawals, PBS (PBS is our focus now), EVM upgrades, etc. But if we can merge and shard correctly, we can solve the biggest and most important problem."

Can gas fees be reduced after “The Merge”?

The Ethereum 2.0 upgrade will bring many changes and is one of the most anticipated developments in the history of the blockchain community. According to information released by the Ethereum Foundation, Ethereum 2.0 will be completed in multiple phases, but it is still unclear whether it will eventually reduce gas fees.

There is a lot of speculation in the Ethereum community that gas fees will be reduced after Ethereum switches to proof of stake (“The Merge”), but the Ethereum Foundation has not confirmed this. In fact, gas fees are based on demand, and there is a limited amount of computing space in each Ethereum block; while sharding may increase the computing power of the Ethereum network, thereby reducing fees, according to the Ethereum Foundation’s plan, the introduction of sharding will not be introduced until at least 2023.

Some experts predict that whether Ethereum gas fees can be reduced depends on the "Layer 2" applications built on the Ethereum network. These applications can complete some independent computing work on their own, but still rely on Ethereum for basic consensus verification.

It can be said that Ethereum upgrades and their impact are complex and depend on a dynamic set of conditions - including network size, ether prices, demand for NFTs, and the status of node operators - which change dramatically every day. As for how all this will develop and what impact Ethereum's changes will have on the wider crypto world, let's wait and see.

It is undeniable that Ethereum’s switch to proof of stake is indeed a groundbreaking move, which may be followed by other cryptocurrencies and even prompt some organizations or governments to fully accept cryptocurrencies. On the other hand, this approach can greatly promote the use of Ethereum and bring cryptocurrencies to a better future.