Ethereum is about to migrate from a power-hungry proof of work (or PoW) system to a more environmentally friendly proof of stake (or PoS) system. This migration is known as “The Merge” and will happen soon.
What is Fusion?
Ethereum will change the way transactions are validated. At the moment, Ethereum works similarly to Bitcoin, where transactions are “mined” by a decentralized network of computers, which bet to solve mathematical puzzles. They are rewarded in new ether (ETH) coins for their work. But this method of computer-to-computer consensus on which transactions will be added to a new block — known as “proof of work” — takes a lot of energy, so Ethereum will soon migrate to a much less energy-using consensus mechanism that must make the network 99% more energy efficient. While PoS makes the rich even richer, it doesn’t harm the same environment. The Ethereum community has been working on migrating to proof of stake since the blockchain’s launch in 2015. Fusion is one of several sets of updates that should make Ethereum faster and cheaper to use. Right now, Ethereum is fraught with slow transaction intervals and high costs. A simple Uniswap conversion of more than $1 equivalent tokens can cost upwards of $50 in transaction fees during peak congestion times. The Fusion won’t solve the problem of high gas prices, but it does set the stage for a series of upgrades that will reduce costs. These updates were known as Ethereum 2.0, but this terminology has recently been dropped. Now, it’s called the “Consensus Layer” (or “Consensus Layer”).
Has Ethereum already migrated to proof of stake?
It is possible to notice that Ethereum already has a proof of stake blockchain, where you can stake as many ethers as you want. This network, called the Beacon Chain, was launched in December 2020. It has been a success since it was launched and currently has 350,000 validators and is already staking 11.7 million in ETH (or $36 billion). However, this Beacon Chain is “interdicted”. It runs parallel to the main Ethereum blockchain and while developers are busy creating the next version of Ethereum, there is not much to do other than staking ETH. The Merger will incorporate the mainnet version of Ethereum — the party that processes autonomous transactions and contracts — to be part of the Beacon Chain. Once the Merger is complete, the PoW portion of Ethereum will disappear forever, as will the mining. After the Merger, it will be possible to operate autonomous contracts on the Ethereum mainnet using PoS instead of PoW. It will also be possible to withdraw staking ethers on the Ethereum 2.0 deposit contract. This cannot be done immediately after the Merger. One has to wait for a post-merger “clean-up” update, which the Ethereum Foundation — the organization overseeing the development of the Ethereum blockchain — hopes to release “very soon” after the update.
When will the merger take place?
Last Tuesday (12), Tim Beiko of the Ethereum Foundation suggested that the mainnet will migrate with the Beacon Chain “in the months following” June 2022. However, updates have already been delayed several times and can be postponed again.
It won’t be June, but likely in the few months after. No firm date yet, but we’re definitely in the final chapter of PoW on Ethereum— Tim Beiko | timbeiko.eth 🔥🧱 (@TimBeiko) April 12, 2022
What needs to be done?
Probably nothing. The Merger will not change anything in Ethereum’s history. It will still be possible to access block explorers such as Etherscan to obtain a complete record of the Ethereum blockchain. If all goes well, you won’t have to move a finger — all changes will be in the “back-end”. However, if you mine ether, you will be out of a job and will have to mine another cryptocurrency. If you plan on staking ETH on the Beacon Chain — unless you have the 32 ETH (about $98,000) needed to operate an Ethereum validator, or delegate ether to another validator to perform this task — you can withdraw your assets only after the Merger. However, it is possible to “withdraw” staking ethers on platforms such as Lido, which issues tokens representing its staking ethers. Furthermore, when the Merger takes place, the issuance of new ethers will be reduced by 90%. Ether issuance could become deflationary if too many people use it.
What will happen after the Merger?
After the Merger, further updates will increase the capacity and speed of the network by introducing “shard chains” (or “fragmented blockchains”), which will expand the network to 64 blockchains. Merging needs to happen first as these shard chains depend on the staking process. The Ethereum Foundation recognized that the need for scalability through shard chains was offset by second-tier scalability solutions such as Optimism and Arbitrum. Second-tier scalability solutions temporarily migrate standard ERC-20 ether and tokens (transferable between protocols) to another blockchain which, in turn, completes the task at a fraction of the cost and at a much lower price. In the future, shards will likely coexist with second-tier technologies. The Ethereum Foundation claims that the need for “multiple rounds of shard chains” will be evaluated by the Ethereum community, but they could provide “infinite scalability”. *Translated by Daniela Pereira do Nascimento with permission from Decrypt.co.