Defining the Merge – Ethereum (ETH) 2.0

Firstly, there is no Eth1 and Eth2 – there is simply the Execution Layer – Ethereum Mainnet (Eth1) and the Consensus Layer – the Beacon Chain (Eth2).

Ethereum Blockchain Foundation is very much into clarity – they are not just thinking big picture they are thinking big blockchain technology.

Although the Ethereum Foundation and associated projects can wax poetic like Philosopher Kings, it is important give them the credit that is due for the achievements that have come before and the achievements that are occurring before our eyes.

Disclaimer: I’m more of a Solana/Bitcoin guy than an Ethereum guy, but I’ve always respected all the L1s and I very much respect Vitalik Buterin and the numerously talented Solidity developers from Ethereum to EVM-compatible chains such as AVAX, Fantom, and even *cough* Binance Smart Chain.

The sheer magnitude of taking a chain from Proof of Work to Proof of Stake is staggering, and although I was not fond of having to research this topic, I found myself enjoying the research more than expected.

I, like most, had a fundamentally basic understanding of the Merge, but after casting a net out for different opinions from the Coin Bureau guy to the Ethereum Foundation itself, found the progress impressive, and measured. Especially considering the calls to action from those who hope to end the bear market with the excitement of the Merge itself. Although many people I have reached out to do not believe the Merge will move the needle and that sharding will be the bullish advancement for the Ethereum blockchain.

Is it priced in?

Although the easy answer is yes, I find myself unable to hold this opinion because I don’t think people know exactly what a post-Merge Ethereum will look like.

We know what most of the L2s are doing, and we’re most definitely not going to go into those right now, but now it seems that the simplest explanation would be that a successful Merge would be extremely bullish for Ethereum as it would complete the most difficult promise that Ethereum has forced people to wait patiently for.

The ability to scale without diminishing security, or decentralization.

We could make some comments regarding the decentralization part specifically, but let’s look at exactly what the Merge is trying to accomplish.

The Merge

The Merge, as of this writing, is tentatively scheduled for Q3/Q4 2022. Anyone following Ethereum at all is aware that this timeline has already been pushed back a few times already, but in all fairness, substantial progress has been made. With all the confusion around the naming (Eth2), the layer 2 wars (Optimism, Polygon, Arbitrum, ZKs, Loopring), and a general sense of unease with the delayed transition to Proof of Stake – I think you could forgive a few people for being a little nervous.

Interesting Fact: The 3rd definition of ‘merge’ is:

‘To sink or disappear in something else; be swallowed up; lose identity or individuality:’

These are high stakes; billions of dollars are at stake (literally), and the Ethereum developers are in the unenviable position of trying to go as fast as possible while slowing when necessary.

This would be similar to driving a car as fast as possible, but constantly having to pump the brakes for safety.

The reason the Ethereum Foundation wanted to stop describing the Merge as ‘Eth2’ was because they believed this would confuse people into believing that there were two blockchains Eth1, and Eth2. Upon reflection I think they were correct.

What is actually happening is that a little while back in December 2020 the Ethereum folks launched the Beacon Chain separately to run alongside the Ethereum Mainnet.

The Beacon Chain allowed Ethereum developers to work on Proof of Stake while not interfering with Ethereum Mainnet. This also allowed many people to stake their $ETH (Over 10+ Million $ETH staked!) while knowing that they wouldn’t be able to withdraw for an indeterminate amount of time after the Merge, as withdrawals of staked Ethereum will be added later.

●    Beacon Chain – Proof of Stake

●    Mainnet Chain – Smart Contracts, Accounts

The Ethereum Mainnet Chain (Execution Layer) will exist inside the Beacon Chain (Consensus Layer).

This will be done as a ‘No Frills’ merge according to Vitalik as important functionality such as withdrawing staked Ethereum, sharding and all sorts of upgrades such as new EIPs will be handled after a post-Merge cleanup fork and a look at how things are operating after the Merge itself.

●    Merged Ethereum Mainnet – Proof of Stake, Smart Contracts, Accounts, Sharding (2023)

I’ve been listening to Vitalik describe what happens after the Merge and it’s quite exciting, but also at the same time appears quite far off.

‘The way that the Merge will work is basically that the execution block that is embedded inside of a Beacon block is going to have transactions and those transactions will just be blobs.’ (Vitalik Buterin)

After the Merge, there will be a difference in that the base Ethereum protocol will not be responsible for showing the entire blockchain back until the genesis block. If you want block history on pre-Merge PoW, you are going to have to look at the Graph, or something similar.

The idea of doing an accelerated merge was to save time, namely six months and a lot of money. Basically, to be done with mining and move on to focusing on the Proof of Stake Ethereum chain post-merge and get cleanup done, move on to sharding and move on from Proof of Work.

With the high demand to complete the transition to Proof of Stake I am honestly very impressed with how the Ethereum developers have planned out the whole endeavor. You must remember, I’m not really an Eth guy. Considering the complexities of the roadmap, the work that has already been done, and just the sheer ego of all that is Eth-touched I’ve found myself in awe of how well they’ve managed to work things in parallel.

‘Merging ain’t easy’ – the Author.

You must always remember that the reasons the Merge had to happen were due to the blockchain trilema.

Security – Secure and decentralized blockchain networks require every node to verify every transaction processed by the chain. This amount of work limits the number of transactions that can happen at any one given time.

Decentralization – Decentralized networks work by sending information about transactions across nodes – the whole network needs to know about any state change.

Scalability – Increasing the size and power of Ethereum’s nodes could increase transactions per second in a secure way, but the hardware requirement would restrict who could do it – this threatens decentralization.

(According to Ethereum Foundation)

Proof of Work was too costly due to the current ESG movement, and whether you believe in ESG, or not it has a large effect on your potential customer base. The transition to Proof of Stake was mainly with security in mind.

Sharding is an idea separate from the Merge and is designed to deal with Scalability. Finally with Decentralization, the final boss; the hopes are that Sharding combined with a post-Merge Ethereum Mainnet will allow the trilemma to be solved.

After the Merge – Sharding

Although all the Ethereum roadmap goals are worked on in parallel the idea is to keep focus on each major upgrade in turn.

This is the plan regarding the post-Merge roadmap. Developers have a lot on their plate as it is, and the consensus seems to be to take on these advances one at a time to avoid taking on all the dangerous tasks at the same time. Originally sharding was to be developed before the merge, but later was decided to be done after the merge to save time and money(billions).

Sharding – Splitting a Database into separate instances, each containing a portion of the whole dataset.

Early on sharding is going to be limited to data shards where the main goal is to access the data quickly from the rollups.

The security of the sharded blocks will start off being committee-based, but over time a higher level of security will be added; with proof of custody and even later DAS (Data Availability Sampling) and staggered shards where shards come in the optimum order.

Other security improvements after the Merge look to be items such as: single secret leader election, VDFs, and the proof of custody.

To avoid getting too technical it is important to note that there are two types of changes happening after the Merge. Short-term consensus layer focused items that have been sitting around for a while vs. execution layer items such as address extension, statelessness, and state expiry.

In conclusion I’ve felt while researching this article that some of the excitement has been lost regarding the Merge, but the technology goals still seem very achievable – albeit slowly. The ‘Paper and Pray’ approach of old Ethereum fork Cardano looms over the Ethereum developers as they attempt to straddle the fine line between safe development, and too late to the scaling party.

I’ve always liked Vitalik Buterin, and I feel that his enthusiasm and continued commitment to educate developers and token holders alike is to be applauded and respected. Vitalik will end up wearing the Merge good, or bad – regardless of if it is warranted. I hope he ends up looking good.