From: Shazeb
What is Ethereum?
Ethereum is a decentralised blockchain platform that establishes a peer-to-peer network that executes and securely verifies application code. These application contracts are known as smart contracts. Ether, abbreviated as ETH, is the cryptocurrency that was developed specifically for use on this platform. Many people believe that Ethereum is currently the second most popular cryptocurrency after Bitcoin.
The crypto wallets like MetaMask, Argent, Rainbow etc. facilitate the interaction with the Ethereum blockchain by holding and transacting the Ether coin.
Consensus Protocol:
Ethereum currently works on the Proof-Of-Work (PoW) protocol. The PoW consensus mechanism requires all the nodes of the Ethereum network to “work” to verify the transactions on the network. The “work” implies the mining and the nodes that work are called miners. This mechanism is extremely difficult to attack and manipulate.
Each block has block difficulty, mixHash and nonce. Each mining node does trial and error to find the nonce for a block. The blocks with identified valid nonce get added to the chain. Each block gets a hash which is used for verification. Even if one transaction changes in the block, the hash changes and hence the manipulation in the block can be identified.
It is a labour-intensive protocol that needs nodes to work to verify the transaction. Hence, this mechanism is also slow and can handle only 13 transactions per second. Also, the scalability and accessibility issues always remain unattended in this mechanism.
What is Ethereum 2.0?
An upgrade to the Ethereum blockchain is being called Ethereum 2.0 also known as Eth2 or “Serenity”. The Ethereum 2.0 will work on the proof-of-stake consensus mechanism. The upgrade to Ethereum 2.0 is not occurring all of a sudden. For many years, members of the Ethereum community have discussed the possibility of putting in place a mechanism known as proof-of-stake.
Consensus Protocol
Ethereum 2.0 works on a Poof-of-Stake (PoS) consensus mechanism. This mechanism replaces the miners with validators. Further, the electricity consumed in the PoW mechanism is now replaced with a stake. To become a validator, you need to deposit at least 32 ETH into the official deposit contract. These tokens shall be used as your stake to validate the transactions on the network. Further, you would also need to download and run Ethereum 2.0 client software. The validators will be selected randomly and will receive the reward for attesting the blocks.
With the PoS protocol, Ethereum 2.0 will process up to 1,00,000 transactions per second.
What is Ethereum Merge?
In the Annual Ethereum Community Conference held in July 2022 in Paris, the Co-founder of Ethereum Vitalik Buterin said that Ethereum 2.0 shall be tentatively released by 19th September 2022. The Merge is the upgradation of the Ethereum system. In this upgrade, the system will migrate from the Proof-of-Work mechanism to the Proof-of-Stake. However, as per the overall upgradation plan for Ethereum, The Merge will only contribute to 55% upgradation. After The Merge, there shall be four more stages in which the upgradation shall be completed. The stages shall be “The Surge”, “The Verge”, “The Purge” and “The Splurge”.
Post The Merge, the transaction per second on the network shall increase by 7,59,000% from 13 TPS to 1,00,000 TPS. With this speed, the Ethereum network will become the fastest network beating Binance Chain, Solana, Ripple and Cardano. Other than the higher speed, the network shall also have a smaller gas fee. Also, the scalability of the system increases multifold.
Further, the Merge shall result in a decline in Ether coins issuance from 15,000 per day to 1500 per day. Consequently, the yearly inflation caused by Ether issuance is 3.2% which will also reduce. Moreover, the Ether supply shall decrease by 0.9%, meaning that the token shall work on the deflationary principle hence increasing the value of the token.
