Ethereum 2.0: Merge of Blockchains Explained
Ethereum, being the second-largest blockchain by volume, is now facing a downtrend. Most people are complaining vociferously about scalability problems, high gas fees and congestion in the network. Let’s find out how one of the most extensive networks in the blockchain industry is going to address these issues and overhaul itself.
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The Long-awaited Ethereum 2.0 Upgrade: What is it?
Ethereum 2.0, or Ethereum Merge, as the Ethereum foundation calls it, is an umbrella term for a set of upgrades consisting of sequential phases. In fact, the upgrades aim to process more transactions per second, reduce transaction fees and make Ethereum more secure.
According to Ethereum developer Tim Beiko, the long-awaited upgrade could be happening sooner than most expected (June 8th).
Now let’s dig deeper into the first upgrade of Ethereum called Beacon Chain to fully understand the essence of Merge.
The Beacon Chain: Proof-of-Stake Replaces Proof-of-Work
The launching of the Beacon Chain was the first phase of Ethereum’s set of upgrades. It acted as a framework for all the future phases and was aimed at managing the registry of the validators. Beacon Chain utilizes a “Proof of Stake’’ consensus mechanism and serves as a consensus layer. The Beacon Chain will exist separately from the Ethereum Mainnet. However, the plan is to connect them. This phase is called ‘the Merge’ as eventually, the Ethereum Mainnet and the Beacon Chain will be ‘’merged’’.
Switching to a proof of stake consensus mechanism addresses several issues. For example, PoS is far more energy-efficient and therefore effectively demolishes the main argument that cryptocurrency is bad for the environment. Another issue that Pos addresses is that users don’t need a lot of computing to secure the Ethereum blockchain.
And finally, the last step will be sharding. Thanks to Shard chains, Ethereum will break up large data into smaller pieces and spread them across 64 new chains. This will improve efficiency and allow the network to work at faster speeds.
The Difference Between Ethereum and Ethereum 2.0
As we have discussed, since April, a new upgrade introduced a test chain that runs parallel to the main Ethereum Mainnet blockchain and operates using a proof of stake consensus mechanism. The long-awaited merge will combine the two parallel blockchains – Ethereum Mainnet and The Beacon Chain– into one unified blockchain.
According to ethereum.org, the Ethereum community has updated the terms: ‘Eth1’ is now the ‘execution layer’ and ‘Eth2’ is now the ‘consensus layer’, which uses a proof of stake mechanism. After merging the two blockchains there will be one Ethereum.
How Could The Merge Affect Ethereum’s Price?
Once the Merge happens, Ethereum is supposed to be more scalable and sustainable. This will lead to more usage and consequently will increase the demand. Theoretically speaking, this will increase the price of Ethereum to new heights. Once the Merge and rollups start working together, there are supposed to be 100.000 transactions per second capacity.
However, we can never surely say what impact may the Merge have on Ethereum’s price, as it is constantly making big changes.
Alongside with new terms and changes, like StarkNet, DeSoc, Proof of Humanity, Soulbound Tokens and Ethereum Optimism, Ethereum 2.0 has been a long-awaited and much-discussed buzzword, that will remove the proof-of-work model in favor of staking. It promises to bring considerable improvements in sustainability and accessibility as well as will impact scalability. Let’s highlight the main points of our article to make sure you are fully aware of the changes and benefits that the Merge will bring:
- Ethereum 2.0 is an umbrella term for a set of upgrades consisting of sequential phases
- The launching of the Beacon Chain was the first phase of Ethereum’s set of upgrades
- The second phase is called ‘the Merge’ as eventually, the Ethereum Mainnet and the Beacon Chain will be ‘’merged’’
- The final step will be sharding, which will improve efficiency and allow the network to work at faster speeds.
- Once the Merge and rollups start working together, there are supposed to be 100.000 transactions per second capacity.
So, the essence of the Merge is to speed up the process of switching from proof-of-work to proof-of-stake. To expedite the transition, the Ethereum foundation is working on decreasing the factors that may lead to delay. But, we should keep in mind that only a post-Merge “cleanup” upgrade may fully address the existing issues.