The Merge, an upgrade to the Ethereum mainnet’s consensus algorithm, will shortly see it switch from a Proof of Work to a Proof of Stake system. The upgrade aims to increase the scalability and energy efficiency of Ethereum. The Merge will take place in September 2022, will join the Ethereum mainnet with the Proof of Stake Beacon Chain.
What drives Ethereum’s upgrade?
Decentralisation is often a key design element for blockchains, as opposed to depending on a central authority. Decentralised blockchains have the advantages of being trustless, permissionless, and more secure due to their resistance to single points of failure.
Platforms must make sure they can meet the worldwide need for transaction processing speeds, commonly known as scalability demands, as blockchains gain in popularity. When the amount of pending transactions overwhelms the blockchain’s capacity, failure to do so may cause network congestion. This frequently results in increased transaction fees.
However, if blockchains wish to maintain their decentralised character, securing and scaling might be challenging. The scalability trilemma, a concept put out by Vitalik Buterin, explains this issue. Scalability, security, and decentralisation are three crucial features that must be balanced, as described by the term “Blockchain Trilemma.”
The pre-Merge Ethereum network cannot meet the requirements for scalability owing to its Proof of Work-based consensus method, as Vitalik Buterin recognised. Scaling a Proof of Work blockchain is often more difficult for a variety of reasons. First off, there is a restriction on the amount of transactions that each block may validate. Second, blocks need to be mined continuously.
For instance, based on the mining difficulty that is automatically changed by the protocol, blocks for Bitcoin should typically be mined every ten minutes. Although the design of Bitcoin is extremely safe, the block time and the maximum number of transactions per block can cause network congestion when demand is strong. Transaction costs and confirmation times can increase dramatically as a result of this.
The Ethereum team suggested a set of improvements known as Ethereum 2.0 to get around such PoW restrictions.