Ethereum, created by Vitalik Buterin at the age of 19, has been the main blockchain for hosting applications and executing smart contracts. Ether (ETH), the cryptocurrency of Ethereum, represents 17% of the world’s crypto market cap.
As Ethereum became so big, some of the design issues became problematic and prevented scalability: congested network, high transaction costs, and high power usage. To overcome these issues, Axie Infinity, a popular Game-Fi application we covered in a report, built their own side chain (Ronin).
Many alternative blockchains have been created to solve Ethereum’s bottlenecks, but none has been able to displace Ethereum. Solana, a leading contender, recently saw many wallets ‘drained’ in an attack.
Knowing the problems, Vitalik Buterin proposed a set of changes to Ethereum known as Ethereum 2.0. A key first step is called ‘the Merge”, which is supposed to resolve the problem with throughput and power usage.
However, what is exactly The Merge? What impact will it have on Ethereum and the Web3 ecosystem in general?
Today, we are releasing Momentum Works’ latest report, The Future of Ethereum: What is The Merge and why does it matter? which is both a deep dive and a crash course on this.
In our pre-release to selected members of our community, one feedback said “This is the clearest and most beautiful report I’ve ever read on the Merge”.
Here’s a short sneak-peek into The Future of Ethereum report:
What is Ethereum?
Ethereum was started to expand the use cases of blockchain technology to beyond just cryptocurrencies. According to Vitalik Buterin, the founder of Ethereum, it was created to serve as a “Smart Contract and Decentralised Application Platform”.
Issues with Ethereum
Though Ethereum is highly popular, there were a lot of issues with the network. The high computation power required was extremely detrimental to the environment. Moreover, Ethereum’s popularity combined with the ability to process to limited transactions simultaneously resulted in high gas fees. Another limitation was the excess network congestion which limited the quality and quantity of applications and smart contracts on the blockchain.
Competitors for Ethereum
Many other blockchains were developed to improve on Ethereum’s limitations. These blockchains could process thousands of transactions per second and weren’t as energy intensive as Ethereum. However, none of these competitors are anywhere close to Ethereum’s popularity.
Proof of Work (PoW) VS Proof of Stake (PoS)
The new Ethereum 2.0 or The Merge transitions from using PoW validation to PoS. Apart from being energy efficient, there are other advantages to the PoS validation method too.
What is The Merge?
The Beacon Chain, which was built in parallel and on PoS, will merge with the Ethereum main chain and act as the consensus layer. As the merge is irreversible and billions of dollars are at stake, a lot of work by Ethereum developers has gone into ensuring the transition, which looks likely to happen in September 2022, is smooth.
To understand more about the future of Ethereum and join the discussion, download our Future of Ethereum report here.
Reach out to us at [email protected] if you have any questions/queries or want to be part of our community.