ETH Merge is the biggest change in the history of Ethereum’s network and its main objective is to switch the way transactions are confirmed from the previously used POW (Proof of Work) to POS (Proof of Stake).
The upgrade is set to start happening in the mid of September, 2022 and will consist of 5 stages. Besides just the switch from POW to POS, the upgrade to Ethereum 2.0 comes with a few other changes, including a more sustainable way of operating, more decentralisation, sharding, adding verkle trees, and more.
So if you want to know how this change will affect traders, what is the planned agenda for the merge, how ETH will change exactly, and how you can benefit from the switch to ETH 2.0, then keep on reading!
The Main Objectives of the ETH Merge
As was already mentioned, the main objective of the ETH Merge is to switch from Proof of Work to Proof of Stake when confirming transactions.
So, what does that mean for traders? It basically means that you won’t need any computing power to mine ETH to be rewarded. All you have to do instead is simply freeze your ETH.
Additional objectives of the ETH upgrade are:
- Further decentralisation by increasing the number of network’s validators
- Scalability of the network by changing its blockchain
- More sustainability by switching to Proof of Stake
- Faster operating: a change from 30 transactions per second, to even 100k/s!
Each objective will be explained in detail further down the article.
The 5-Stage Plan to Switch to ETH 2.0 – ETH Merge Agenda
The ETH upgrade is set to happen in the following five stages:
- The Merge
- The Surge
- The Verge and the Purge
- The Purge
- The Slurge
The names alone don’t tell us much, so let’s go through each stage and explain it in more detail.
Stage One: the Merge
Stage One of the ETH upgrade is called the Merge and that is when the switch from the POW to POS is set to happen. The Merge stage is scheduled for the 15th of September, 2022.
What’s most crucial for this stage of the project is that the supply of ETH will be significantly decreased.
Right now, we have around 122,051,507.75 ETH (source: coinmarketcap), but the maximum quantity of ETH that we could potentially reach is not yet known, which means that it could be unlimited. However, the Merge upgrade is said to decrease the ETH supply.
As of now, there’s around 5.5 million new ETH yearly. But, after the upgrade, we’ll have around 166k each year IF there’s going to be 1 million ETH staked. No matter how many ETHs will be staked, the number of the new ETH on the market will decrease from what we know now.
The decrease in supply is estimated to come up to 90%! Which in turn, brings a high probability that the ETH price in USD will increase in the long run.
Stage Two: the Surge
Stage two, the Surge is all about the ETH blockchain. Previously, we had one blockchain on Ethereum’s network. But after the upgrade, we’ll have something called sharding happen. Namely, shard chains will be added to the whole blockchain, which will result in 64 chains, including the main one. The original, one blockchain of ETH will be a part of the new system.
Thanks to this change, the ETH will operate in a much faster way and will be much more scalable. Right now, ETH’s network is able to perform around 30 transactions per second and after the changes, it’s estimated to be able to cover even 100 thousand transactions per second! Talk about upgrade!
Of course, this may in turn prompt others to create their decentralised applications, right there on the new Ethereum’s blockchain.
Stage Three: the Verge
Stage three and four are connected with each other and both aim to increase the number of the network’s validators.
Stage three: the Verge is mainly about switching from using merkle trees to verkle trees instead.
The verkle tree technology is quite complicated, so we suggest that all brave souls that want to try to read about it and understand it, to do so directly at the source: https://vitalik.ca/general/2021/06/18/verkle.html.
But what does the switch to verkle trees mean for regular traders? We’re here to answer. Well, as was mentioned, this change will help increase the number of the network’s validators (those who confirm transactions within the network). And because there will be more validators, the network will naturally be more decentralised.
Stage Four: the Purge
Let us now explain how actually stage three and four of the ETH upgrade are connected. We’ve just said that the switch to verkle trees aims at increasing the number of network’s validators. And the way that this will actually happen is through stage four: the Purge.
The Purge stage will limit the needed data storage within the network and will in turn influence the ETH nodes. How exactly you may ask? The nodes of the ETH network won’t need to store any data pertaining to transaction history.
Such a simplified network will be easily accessible to more validators, which we now know means it will be more decentralised!
Stage Five: the Slurge
Stage five: the Slurge is every other change and tweak that hasn’t yet been made public or simply too insignificant to mention.
Ethereum’s creator – Vitali Buterin describes this stage as simply ‘all of the other stuff’.
3 Important Questions to Ask About the ETH Merge
No! And that’s because the 1.0 network will still be a part of the 64-chain blockchain.
ETH creator – Vitali Buterin says that after completing stage one – the Merge, we’ll be at 55% progress. After the Surge phase, ETH 2.0 will be 80% complete.
It’s safe to say that the whole process of upgrading Ethereum to ETH 2.0 will take years. In the meantime, we should get more updates on the whole process and hear of additional changes that will take place during the merge. Remember that this switch is a work in progress and we may not know of everything just yet.