Ethereum is embarking on the most significant upgrade in its history: the consensus shift to Proof of Stake (PoS). The “merge” – the merging of the current blockchain with the beacon chain – represents a turning point for the largest smart contract platform, an incision that adapts the network to the increasing requirements and should make the vision of a decentralized world computer a reality . The time will probably come in August: Then the fruits of the years of preparation should finally be able to be harvested. However, Ethereum has not yet reached the end of its development.
Proof of Stake: Everything New, Everything Better?
The consensus shift marks a fresh start for Ethereum. Instead of as before, the transition to Proof of Stake means that the network is no longer secured by miners and their computing power – known as Proof of Work (PoW) – but by validators and their ether deposits, the stake. Sounds like a subtle difference, but it has serious consequences.
“The first and most obvious advantage of Ethereum on Proof of Stake is the drastically reduced energy consumption. We expect to use 99.98 percent less energy than Ethereum’s Proof of Work is currently using,” Ben Edgington, one of the senior minds in Ethereum development at ConsenSys, told BTC-ECHO.
Ethereum’s energy requirements are currently high Digiconomist at over 90 terawatt hours per year. About as high as in the Philippines. Due to the significantly improved energy efficiency, Ethereum only consumes a hundredth of that after switching to PoS.
A sea of more
“In addition, Proof of Stake offers stronger security guarantees than Proof of Work at a much lower price,” explains Edgington. “New ether issuance to validators will be 90 percent lower than current issuance to miners, and yet we will benefit from a much better security model.”
Coupled with this: higher network activity. Expensive hardware, maintenance, electricity costs – Participation in Proof of Work involves high costs for miners. PoS requires a financial commitment, the stake itself. However, there are no “operating costs” like PoW. The calculation: With smaller barriers to entry, more people participate in network security, making Ethereum more robust, decentralized and inclusive. The threat of 51 percent attacks also disappears when the consensus changes.
“While Proof of Stake still has centralizing powers, we believe these are less than Proof of Work. PoS allows a much wider range of actors to participate in running the network,” adds Bedgington.
In August it’s time – probably
A specific date was never officially set. The changeover was expected roughly in June. After it became clear that the period could not be met, a new date is in the air: August. Ben Edgington doesn’t want to be nailed down to that just yet. But: “Many of us believe that a merger in August is very possible”.
Edgington: “Testing is going very well indeed. The specification is complete. The client teams are ready, particularly on the consensus side, although one or two of the executing client teams (Eth1) need a little more time.”
The merge test run on the Ropsten testnet on June 8 serves as a dress rehearsal. “If that goes well, I see every reason to proceed with The Merge as soon as possible”.
The bomb is ticking
So the clock is ticking. Literally. Because in the background the “Difficulty Bomb” puts pressure on. The Difficulty Bomb is a mechanism that increases the level of difficulty in the Proof-of-Work algorithm. The result: longer block times and lower ETH rewards for miners. Once the “bomb” bursts, the level of difficulty keeps increasing until the blockchain stops producing blocks, grinds to a halt and freezes – known as the “Ice Age”.
The mechanism is both a blessing and a curse, as Edgington explains: “I believe that the bomb is a useful coercive feature for us as developers and that this should be our ‘Plan A’. Other developers, on the other hand, feel that this pressure is not helpful.”
So far, the detonation of the Difficulty Bomb had to be delayed again and again by a hard fork. But: “If we could deliver The Merge in August, we wouldn’t have to postpone the Difficulty Bomb anymore,” says Edgington optimistically. “We will try to reach an agreement on this issue in the next two weeks. I expect the main discussion on whether to postpone the Difficulty Bomb will take place at the June 10 core developers meeting.”
Expand the neck of the bottle
More decentralization, security, energy efficiency: The change in consensus marks a kind of zero hour for Ethereum – and thus also the beginning of new development work. There is still a need for action after the merge, especially at the scaling level, i.e. the throughput performance of the network. Again and again a symbol for the scaling deficits: high transaction fees.
Layer 2 solutions in particular should provide the necessary boost in performance. “We no longer plan to introduce in-protocol shard chains,” explains Ben Edgington. “Instead, we expect that scaling will come via layer 2 solutions like roll-ups.”
Ethereum is growing together
For this, “an enormous data availability capacity is provided in the protocol”, which allows “roll-ups to carry out thousands of transactions per second with the full security of the Ethereum Base Chain”. A significant improvement: Ethereum’s throughput is currently around 15 transactions per second. A first version will be deployed with the first hard fork after the consensus transition, “maybe 6-9 months after the merge.” The full version would then be the “next priority”.
Most of the work should be completed in about a year. So the to-do list is still full. The thickest chunk should be shoveled away in August, paving the way for a new Ethereum age.
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