How Ethereum Merge has Impacted the Blockchain Industry, Including Polygon & L2layers?

 Ethereum and Bitcoin are two of the most well-known Blockchain systems. Ethereum is considered to have done for DeFi what Bitcoin is believed to have done for cryptocurrencies. Ethereum is seen as having greater potential than Bitcoin. Both blockchain systems have implemented Proof-of-Work (PoW) as the consensus method. Proof of Work (PoW) and Proof of Stake (PoS), the two most prevalent consensus algorithms, check every transaction in the blockchain before printing them into the block.

After a lengthy process that lasted for six years, the Ethereum Merge is finally complete. The proof-of-work (PoW) model, which is currently the basis for the second most valued cryptocurrency, will soon be replaced by the proof-of-stake (PoS) model, which is anticipated to be substantially more energy- and cost-efficient. Although Proof of Work is thought to be the most secure method, it is a power-hungry technique that consumes a significant amount of electricity in the mining process. For instance, Bitcoin uses roughly 127 Terawatt-hours of electricity, which is more than Norway uses in a full year regarding the total amount of electricity it consumes. Furthermore, poS techniques need validators to store and stake tokens, unlike PoW mechanisms, which require miners to solve cryptographic challenges. Additionally, it consumes 99.9% less electricity compared to PoW.

Influence on DApps

The impact on dApps will be relatively insignificant since speed and costs won’t be significantly impacted. Another risk is associated with the PoW hard fork, as most decentralized applications (DApps) have stated that they will not accept the hard-forked chain and will instead support the ETH PoS chain. If a fork takes place, there is a possibility that specific DAP tokens will see increased volatility. As the other Ethereum testnets have been phased out, the only significant modification that will occur is the migration of our operations from the Kovan and Ropsten testnets to the Goerli network. This is the only change that will be of significance. Aside from this, the merger does not call for changes in how smart contracts carry out their operations on the chain Hill Climb.

The Merge upgrade is the first of five planned updates for the Ethereum blockchain and prepares the groundwork for the Surge upgrade. In addition, because of the significant drop in energy consumption caused by the Merge, institutional investors who were previously unable to buy tokens that run on blockchains that use the PoW consensus mechanism may now be able to buy ether (ETH) for the first time. This group of investors was previously prohibited from doing so. The creators of Ethereum realized a very long time ago that for Ethereum to keep up with the continuous developments in DeFi, Ethereum needs to be ESG compliant and have a low impact on the environment. However, Ethereum is too huge to perform such updates, and if there is a service disruption. In contrast, if the upgrade is being performed, it will be extremely expensive for all decentralized applications (DApps) that are either directly or indirectly running on Ethereum. Furthermore, any bug could affect the Ethereum in people’s wallets.

What Effects Will the Merge of Ethereum Have on Polygon and Other L2 Layers?

This Merge will not result in lower gas prices; therefore, there will be no impact on existing DApps or solutions for the second layer. Instead, it will help strengthen the scalability of Ethereum and other platforms built on Ethereum.

The Ethereum network is a foundation for the construction of layer-2 networks (also known as Layer-1). Different protocols each have different characteristics. Layer-2 nodes are responsible for autonomously carrying out transactions. These transactions are recorded in the Ethereum blockchain.

If Ethereum’s transition to proof-of-stake is successful in achieving its goal of addressing both gas fees and transaction volume, then the need for layer-2s will be decreased. In addition, moving to a system that relies on proof-of-stake can help strengthen the security mechanism of the network.

Is Proof-of-stake Preferable to Proof-of-work in This Situation?

The Ethereum Foundation, a nonprofit organization that provides funding for developing the Ethereum ecosystem, estimates that Proof of Stake will reduce Ethereum’s energy consumption by approximately 99.95 percent. In addition, proponents of proof-of-stake claim that proof-of-work mining concentrates power in the hands of those who have the financial means to purchase expensive crypto mining rigs known as ASICs. They claim that because Proof of Stake (PoS) gives control of the network to those who “stake” crypto with it, attacks become monetarily unfeasible and ultimately fruitless.

In response, proponents of proof-of-work argue that proof-of-stake mining comes with its centralization and security problems, making it possible for malevolent actors to “purchase” control of the network directly. In addition, they highlight that PoS is a less battle-tested technology than PoW, which has shown itself to be resilient as the backbone of the two main blockchain networks.

After the Merge, What is the Next Step on the Ethereum Roadmap?

After the Merge, the main developers of Ethereum will work in the same manner as previously on the open-source network. In addition, they have planned further enhancements to the network’s fees, throughput, and security that will take place in the months and years ahead. Following the completion of Merge, one of the developers’ primary focuses will be sharding, a technique that aims to increase Ethereum’s transaction throughput while simultaneously lowering its fees. This is accomplished by distributing network activity across multiple “shards,” which are analogous to separate lanes on a highway. (Updates of this kind were initially planned to follow the Merge, which was formerly referred to as “Ethereum 2.0” or “ETH2,” but they were deprioritized because of the success of third-party rollups in addressing some of the same problems).

Enshrined proposer builder separation (PBS), which will separate the “builders” who add transactions to blocks from the “proposers” who bring them forth for approval from the wider network, is another feature that is planned to be implemented in the future and is included on the roadmap. PBS is being proposed as a solution to the maximal extractable value (MEV) issue that Ethereum is currently facing.

The Ethereum network will, in effect, split into smaller data blocks to offer faster processing. This will bring about the so-called Ethereum 2.0, which will have the capacity to handle 100,000 transactions per second. At the moment, Ethereum can process around 30 transactions per second. “Decentralized networks can function with reduced fixed costs under the new paradigm, and they can become more flexible for larger-scale solutions beyond only currency and financial applications.”

Conclusion

The fact that the control of the Ethereum blockchain network will ultimately rest in the hands of a small number of validators with higher holdings is the most significant cause for concern. This raises doubts about the degree to which cryptocurrency transactions are decentralized. It has been asserted that PoS is a safer and more secure option than PoW; however, this has not yet been demonstrated. Mining is used to verify transactions in proof-of-work systems; however, this process consumes significant energy. When using proof-of-stake, validators are selected according to the amount of “stake” they have in the blockchain, which refers to the amount of that currency that has been committed in exchange for the possibility of being selected as a validator.

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