With Ethereum’s ‘Merge’ Now Complete, Another Huge Network Upgrade Is Coming In 2023

key point

  • Merger makes the Ethereum blockchain more energy efficient and may reduce the supply of ether over time
  • Much work remains to be done to make Ethereum more scalable
  • An upgrade planned for 2023 will try to make Ethereum process more transactions per second

Last week, the second-largest cryptocurrency by market cap, Ethereum (Ethereum -1.02%), achieving a huge milestone. The developers completed The Merge, a much-anticipated change to how the network is managed, how transactions are approved, and how new blocks are formed. The merger has been going on for years, and while this is an important achievement, more work needs to be done if the Ethereum community wants to further expand the blockchain. In fact, another major upgrade could happen in 2023. Here’s what investors should be aware of.

what the merger accomplished

The main work done by The Merge is to transform Ethereum from a proof-of-work management mechanism to a proof-of-stake mechanism.

Proof of Work is the original way blockchain networks operate and it is still used by pioneer blockchains bitcoin, The largest cryptocurrency by market cap. Under these types of mechanisms, mining rigs—at this point, usually specially designed arrays of computers—try to solve cryptographic puzzles as quickly as possible to have a chance to verify transactions from the network and add new blocks to the blockchain.

In return, these miners will receive tokens.As the price of the coin rises, especially in the largest cryptocurrency, the competition to solve these cryptographic puzzles intensifies, requiring miners to use massive amounts of computing power and hardware to solve them. This makes proof-of-work protocols very energy-intensive and therefore bad for the environment.

Under a proof-of-stake protocol, investors who own tokens can “stake” them—essentially, locking them up for a period of time in order to lend them to others. Doing so puts token owners into a lottery-like system for a chance to validate transactions and form new blocks. For their contribution, those who stake their tokens on the network will receive a certain amount of Ethereum according to a sliding scale formula.

Moving to proof-of-stake will not only make Ethereum more energy efficient, it will also reduce the amount of ether that is given to validators per block, which will effectively slow the growth of the ether supply — and potentially cause it to decline over time. This It could eventually drive up its price.

next big step

although Completing the merger is a critical step In terms of improving the network, it doesn’t solve another big problem that has plagued Ethereum users for a while: high transaction fees, also known as “gas fees.” Ethereum has seen a lot of usage in recent years, which has clogged the network and resulted in very high gas fees, making the network less attractive and accessible to the average user.

With support from The Merge, developers can now turn their attention to an upgrade called sharding, which basically breaks the Ethereum network into smaller pieces and allows it to process more data, ideally Transaction approvals can be obtained more easily and faster, reducing congestion.

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Sharding is expected to maintain the decentralized component of Ethereum as it will enable people to access the network from their personal laptops or mobile phones. This makes the network more accessible and may lead to more users getting involved. The more users on the network, the more decentralized and secure Ethereum becomes, which makes it more difficult to attack.

Sharding will also add extra data to the network and will be paired with other technology called “Layer 2 Rollup,” which will allow decentralized applications on Ethereum to bundle transactions and use data more efficiently. If sharding works, this could allow Ethereum to process up to 100,000 transactions per second, whereas it can now process less than 20 transactions per second.

What to look for in 2023

It’s hard to know when sharding will happen, or if it will be done in 2023. It will be completed in two distinct phases, and Ethereum’s website lists it as a 2023-2024 event on some pages.

Also, there still seems to be a debate among developers on how to implement certain aspects of sharding, so I would expect some delays. While it’s hard to be patient, for the long-term sustainability and success of Ethereum, it’s important for developers to get these upgrades right.

Investors should also take a breather and praise the developer for just completing the merger. It’s not an easy task, and it’s a testament to the developer’s ability. This leads me to believe that sharding will complete as promptly and correctly as possible.

This article appeared first In “Motley Fools”.

Bram Berkowitz There are positions in Bitcoin and Ethereum. The Motley Fool holds and recommends Bitcoin and Ethereum.variegated fools have one Disclosure Policy.

A representation of Ethereum and its native cryptocurrency ether can be seen in this illustration taken on November 29, 2021.
A representation of Ethereum and its native cryptocurrency ether can be seen in this illustration taken on November 29, 2021.

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