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Saturday, February 4, 2023

4 Constitutive phases following Ethereum’s Merge that will change cryptocurrency trading forever

The latest Ethereum upgrade, called the Merge, finalized the blockchain’s transition from proof-of-work to proof-of-stake, which is the most energy-efficient consensus mechanism. After this modification, Ethereum’s energy consumption was reduced to approximately 99.95%. Given the need for sustainability in blockchains and cryptocurrency transactions, this step is one of the most important toward global acceptance of digital currencies as legal tenders.

But this is only the first prominent change to Ethereum’s system. Four more are expected to follow the Merge and change the transactional process forever. Here’s what will happen.

The Surge

The Surge is supposed to happen in 2023 when Ethereum is introduced to sharding technology, which means the blockchain’s network will be divided into smaller bites called shards. The Surge is expected to increase the network’s scalability.

Scalability has always been a problem in the Ethereum universe since it grew so fast, and the number of Dapps built on the network constantly increases. As a result, gas fees are rising, which is causing the network to become unaffordable for regular people. Ethereum is the place where DeFi systems and DAOs are created almost continuously because the platform offers so many possibilities to developers. However, that’s leading to network congestion because of the old proof-of-work mechanism. Still, since the Merge arrived, we expect that scalability will be less of an issue.

Some temporary scaling solutions for Ethereum include the following:

  • Rollups are multiple transactions executed into a batch that contains hundreds of compressed transactions and is transferred to the main chain. This would reduce the volume of transactions the main chain has to process and would also enhance security;
  • Sidechains operate on the separate blockchain and are designed for deploying projects and leveraging their scalability for Dapps;
  • State Channels allow two parties to transact without the need for the main chain to validate every one of them. This would enable a multi-signature contract to execute the transaction with the approval of the involved parties;

The Verge

The Verge would help upgrade the blockchain from the Merkle Tree to the Verkle one. A Merkle Tree is a non-lead node employed in cryptographic products to provide safe encrypted blockchain data. Merkle Trees use a minimal amount of disc space and have the potential to verify the accuracy of data efficiently.

The Verkle Tree is a similar technology but poses more extension capabilities. It eliminates the requirement of presenting proof to every sister node at entry points to improve network communication. Overall, both systems are crucial for any blockchain because they optimize its storage capacity. As long as there are no storage issues on the blockchain, the network is safe, and all transactions are confirmed and synchronized across the nodes.

Storage capacity can somehow influence a cryptocurrency’s price if it falls, for example. That’s because investors might believe people are leaving the network along with their belongings, so they avoid investing. However, that’s not always the case. If you want to know what is the price of Ethereum to buy Ethereum online, you should consider the media coverage and supply and demand stats.

The Purge

The Purge is about the hard drive space needed for validations, and it’s supposed to eliminate historical data and bad debt while streamlining storage which will reduce network congestion. By simplifying the Ethereum protocol and not requiring nodes to store history, the Purge will cut down the amount of space on the hard drive, doing something called state expiry. That means data that has not been recently accessed in a long time will be removed to benefit the Ethereum blockchain by:

  • Allowing clients to remove inactive codes related to legacy transactions;
  • Reducing bandwidth on the network so that less data needs to be synced;
  • Minimizing hardware requirements for nodes;

Nodes play a crucial role in any blockchain. As there are many types of nodes with different functions, their jobs need to be approached with more decentralization in order for the platform to be 100% secure and easy to access. Without blockchain validation, the transactions can’t be verified and ensured they’re legal so the network can become an unsafe place for traders otherwise.

Although Ethereum is an efficient blockchain, since it’s continuously growing, it might not be able to keep up with the demand if it doesn’t improve constantly. However, many steps are needed to reach a certain point when Ethereum can become a sustainable, scalable, and 100% safe cryptocurrency. However, the current plan still has to go through constant improvements.

For example, at some point, Ethereum’s creator had also talked about the Scourge, a step in which the blockchain would provide a reliable and credible transaction inclusion while avoiding other risks, including centralization.

The Splurge

Finally, the ultimate upgrade the Ethereum blockchain is supposed to get is called the Splurge, and it’s supposed to be a series of smaller upgrades to ensure the network works properly after the previous four stages of development. Some of these updates would:

  • Help upgrade the underlying infrastructure;
  • Eliminating governance and smart contract risks;
  • Providing a safer cross-chain bridging;

All these attempts should create a newer and faster blockchain when 100,000 transactions per second will be processed. Rollup costs would also be drastically reduced, and Ethereum’s decentralization will be maintained by decreasing costs and eliminating barriers to entering to run as a validator.

All blockchains need constant developments and repairs in order to minimize the issues related to excessive mining to keep up with all investors, nodes, and validators. Ethereum’s developers plan to approach a VDF (verifiable delayed function) system where the results of an evaluation are efficiently verified by running a given number of steps, which would greatly benefit the blockchain. But until then, we’ve yet to experience and test Ethereum’s phases.

Final thoughts

Ethereum is the second leading cryptocurrency and the most famous blockchain for providing all the means for developers to create Dapps and DAOs and use many other benefits. But as the market increases and the demand rises too, the platform must develop and find better techniques to face all those investors and nodes.  

Katrin Anderson
Katrin Anderson
Katrin Anderson Is a technical writer who loves sharing information related to any technologies to the world. Apart from this, she loves listening to music at free time.

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