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When someone mention cryptocurrency, Bitcoin is likely the first thing that comes to mind. However, there is another that is also gaining more spotlight, Ethereum or ETH, the 2nd largest cryptocurrency in term of marketcap.

Ethereum was founded by Vitalik Buterin and launched in 2015. Unlike Bitcoin, Ethereum blockchain supports Smart Contract which allow developers to create decentralized applications, leading to new innovations on the blockchain including Decentralized Finance, GameFi, Stablecoin, NFT and many more. Ethereum is considered the first of 2nd generation blockchain.

However, Ethereum still has its limitation which lead to the idea of developing Ethereum 2.0 that will enhance many functions including speed, decentralization, and security. In this article, we will learn more about why Ethereum aims to become 2.0 and how it plans to do so.
 

The Merge, First Step to Ethereum 2.0

The Merge is the event that is predicted to happen in September 2022. It is when Ethereum will finally change its consensus algorithm from Proof-of-Work (PoW) to Proof-of-Stake (PoS) which is widely used by new generation of blockchains.

The idea behind the Merge was dated back to 2020. During the time, Ethereum developers have created another blockchain called Beacon Chain which used PoS and allowing ETH holders to stake their ETH on the network to help secure and develop the network. When the network is ready, it will undergo a process called “The Merge” where Beacon Chain merges with Ethereum mainnet and changing mainnet’s consensus to PoS.
 

Why is changing to PoS important? Because Ethereum currently uses PoW to verify transaction on the network which requires mining or using computers to solve equations in order to create a block. Mining consumes huge amount of electricity, to make the matter worse, the bigger the blockchain the more competition between miners are, resulting in even more electricity wasted to run the network. There was a report that Ethereum consumes electricity almost 112 TwH/year which can be compared to the amount required by a small country in one year.

This is why PoS considered a game-changing for Ethereum, as it completely changes how the network process a transaction from running a mining rig to staking coins. ETH holders can stake their coins on the blockchain as collateral in order to be randomly selected by the system to validate a transaction and create a block, the validator then receives ETH as reward for performing the task correctly and with integrity. Without mining, Ethereum is predicted to be able to reduce its energy consumption by almost 99%.

Next Steps for Ethereum 

While The Merge is just weeks away, it is actually the very first step to Ethereum 2.0 that will solve the energy consumption issue. The other issues which include transaction speed, decentralization, and security will be addressed in the next milestones with the rhyming names and details as followed:

The Surge

This step will introduce Sharding to the ecosystem. Sharding is the system that split information into smaller packages and distribute these packages to be processed by each node in blockhain, also known as Pararelle Processing. With this, Vitalik Buterin the co-founder believes that it could speed up the transaction time to 100,000 transactions per second compared to current speed at 15 – 20 transactions per second. 

The Verge

This step will introduce “Verkle trees” and “Stateless clients” into Ethereum ecosystem allowing users to run a node without requiring to store an immense amount of data, which in turn is an incentive to increase the number of nodes, and ultimately leading to more decentralization.

The Purge

This step aims to cut down some unrelated historical data to free up spaces as well as to remove Technical Debts that were created during initial stage of development to ensure more sustainability of the network in the long-run.

The Splurge

The last step may consist of a bunch of minor upgrades to ensure that the previous big upgrades can work without any hiccups. Buterin described this part as “the fun stuff.” 

Conclusion

The Merge is first step to Ethereum 2.0 which is predicted to occur during September 2022. This process will change Ethereum’s consensus algorithm from Proof-of-Work that consume an enormous amount of energy to Proof-of-Stake that can reduce energy consumption by 99%.

In addition, there more Ethereum’s upgrades planned for the near future, which are Surge, Verge, Purge and Splurge. These planned upgrades will offer more transaction speed, security, and decentralization for the 2nd largest cryptocurrency in the world, the Ethereum. 

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*Cryptocurrency is highly risky; investors may lose all investment money. 
**Digital assets involve risks; investors should study information carefully and make investments according to own risk profile. 
 

Published : September 07, 2022

By : THE NATION