The Merge: Was it a significant upgrade for Ethereum?

With the transition of Ethereum into Ethereum 2.0 after The Merge took place in September 2022, the energy consumption of this network reduced by 99.95 percent, as claimed by reports. The transition from PoW (Proof of Work)  to PoS (Proof of Stake) not only removed the requirement for mining nodes to compete for block rewards or the cryptocurrency rewarded to a miner when they successfully validate a new block, instead required node operators to stake 32 Ether as collateral to become network validator and eventually earn rewards. 

Analysts are of the belief that it was a turning point for the industry when Ethereum successfully made the switch to proof-of-stake since it fundamentally changed how safe smart contracts and other blockchain services are. Instead of requiring expensive hardware, anyone with funds can participate in the POS system.

As a matter of fact, Ethereum PoS is significantly more energy-efficient than proof of work. PoS comprises a consensus mechanism for processing transactions and adding new blocks to a blockchain in cryptocurrencies. A consensus mechanism is a technique for ensuring the security of a distributed database and validating entries. 
When it comes to the productivity of PoS, then in order to ensure security in blockchain, less CPU power is required to perform the process. The current transaction of Ethereum is around 15-30 transactions, with its vision to reach upto 1,00,000 transactions per second after the rest of the expected upgrades.  

Ethereum turns deflationary 

The Merge represents a significant step in building a stronger and more efficient financial environment for Ethereum users. In addition to lowering the energy costs associated with mining, The Merge is said to lessen the quantity of ETH which is available for future use. The current scenario indicates a deflationary environment which suggests an increase in demand for Ethereum along with higher prices over time and thus considered positive by many analysts. 

As compared to the on-chain data from 26 October 2022 to 24 January 2023, Ethereum has garnered approx 18 times more TVL ( total value locked) than most layer-2 blockchain, as per the reports.

As per the report from BeinCrypto, a news platform, it revealed that Deflation on the Ethereum network is ramping up as the supply has dropped to a record low six months after The Merge. Since the milestone event happened just under six months ago, the ETH supply has dropped by nearly 63,000. The current supply stands at about 120.45 million ETH. At these rates, the Ethereum supply is projected as 118.1 million by the year 2025. Issuance rewards for stakers will stand at around 4 percent per year, trumping the burn rate for non-stakers, which is 1.8 percent per year. The supply should also have a pearl of 120.6 million ETH at current levels over the next two years.

As per the data from Glassnode, blockchain data and intelligence platform showed that allocation of stacked Ether was done by service providers include, Lido which holds 29.3 percent of the staked ETH, followed by Coinbase at 12.8 percent, Kraken at 7.6 percent, and Binance at 6.3 percent. 

Decrease in carbon emissions 

The decrease in supply of Ethereum is the clear cut indication of the Ethereum PoS achieving its goals of reducing 99 percent of CO2 and energy consumption. 

In addition to benefiting the environment, the reduction in energy use and carbon dioxide emissions guarantees Ethereum's long term survival as a cryptocurrency asset. The decrease in the energy cost may provide miners with the accessibility to control their operations and thus encourage more platform development.  Additionally, with fewer greenhouse gas emissions, Ethereum users may rest easy knowing that their investments are promoting a future for everyone that is more environmentally friendly. 
 

The surge, verge, Purge and Splurge 

Ethereum co-founder, Vitalik Buterin announced the upgrades to the existing The Merge in four main stages, which may likely be introduced this year. ‘The Surge,’ which is said to include the side-chains and sharding to Ethereum, with the objective to reduce the transactional time and cost. ‘The Verge’ will target the Verkle Trees which would emphasise on the reduction of existing node size. Then comes The Purge which would prioritise the network congestion problems, thus streamlining network storage. Fourth stage would be ‘The Splurge' which will upgrade to the fine-tune network operations and address any other issues from the older development stages.