What will the future of Ethereum (ETH) look like after The Merge?

With The Merge, the Ethereum (ETH) blockchain signs its transition to Proof of Stake. But this update is just one step in Ethereum’s extended roadmap, not an end in itself. In this roadmap, there are 5 major phases, of which The Merge is a part. Let’s discover together the four other episodes to come, responsible for forging the future of the Ethereum blockchain.

On September 15, 2022 at 8:42 a.m. ET, Ethereum began its big update with The Merge. The latter represents the beginning of a very long roadmap aimed at improving the second market blockchain.

This roadmap is made up of several important steps, which are detailed in this article, and briefly summarized below:

  • The Merge: laying the foundations and the arrival of Proof of Stake on the Ethereum blockchain;
  • The Surge: implementation of sharding and improvement of scalability thanks to rollups;
  • The Verge: the arrival of Verkle Trees leading to better scalability and decentralization;
  • The Purge: Ethereum blockchain history storage optimization;
  • The Splurge: miscellaneous and minor improvements such as account abstraction or zero-knowledge proofs.

The Merge is the first step in a long roadmap

The Merge as a starting point

With The Merge, Ethereum went into “Proof of Stake” (PoS), or proof of stake in French. This consensus method thus marked the end of the proof of work, “Proof of Work” (PoW) on the Ethereum blockchain. The latter was indeed considered technologically less advanced and a waste of energy in a world under high energy tension.

With this new consensus method, block creators put a deposit in Ethers (ETH) on the line that they are willing to lose in case of bad behavior. On a proof-of-work Ethereum, the only punishment inflicted on such actors was a simple waste of energy. More importantly, the switch to PoS has reduced Ethereum’s energy consumption by more than 99.95%, a necessary step in the eyes of international regulators.

Finally, the PoS also begins the revaluation of the Ether token. Furthermore, with the arrival of The Merge, the rate of issuance of ETH will decrease by around 90% and the annual inflation rate is reduced to 0.49%, from 4.13% previously.

Coupled with the burn of part of the transaction fees, this aims to make the Ether token deflationary. In response to the “Sound Money” of Bitcoin (BTC), Ethereum (ETH) is entering the era of “Ultra Sound Money”.

Much more than just a move to proof-of-stake, The Merge laid the foundation for the future of Ethereum. Indeed, contrary to some beliefs, PoS has not helped the scalability of the Ethereum blockchain. Thus, neither fees were reduced nor transaction throughput improved. However, to achieve these two goals (and many others), this transition was indeed necessary.

A glimpse of the future for the Ethereum blockchain

Contrary to popular belief around The Merge, this update is more of a milestone than an end in itself. And for good reason, Vitalik Buterin, co-founder of Ethereum, published in December 2021 a diagram that breaks down the next steps on the Ethereum roadmap. This is shown below.

Figure 1: Ethereum roadmap

This graph demonstrates among other things that The Merge actually only counts for one step out of 5 , which make up Ethereum’s long-term roadmap. On this roadmap, the time scrolls from left to right and the filling of the blocks indicate the progress in each of the stages. Thus, all these steps are carried out in parallel, and not sequentially.

A new “Rollup-centric” vision for Ethereum

Over time, the Ethereum Foundation and its core developers gradually abandoned the idea of ​​a scalable mainchain. Indeed, it seems that Ethereum is moving towards an architecture similar to that of Cosmos with its “Interchain Security”.

There would therefore be a central chain, concentrating security, data, and the purpose of transactions. Around it gravitate layer 2, or second layer blockchains, benefiting from the security of the main network. It is on these that the transactions would be executed, the data of which would be sent back to layer 1 of Ethereum.

Therefore, the most important thing for the Ethereum blockchain is not to improve its scalability but to make it simpler and more practical to use for all the layer 2 that will come to connect to the central network.

The Surge, the implementation of sharding on Ethereum

Sharding, a concept of horizontal fragmentation

The Surge is mainly marked by the arrival of sharding on Ethereum. This concept is decades old and first saw the light of day in computing. The idea is to horizontally segment a database in order to simplify access to it.

To imagine the concept, imagine a city that is only accessible by one road. This is likely to be often bottled and is therefore very inefficient. This is the case of Ethereum without sharding. With this method, one creates very many ways, which discharge from the different districts. The load is thus distributed and the traffic is more fluid.

Figure 2: Example of sharding in a database

The use of sharding on Ethereum will therefore allow the blockchain to be divided into several segments, called shards. Each of them with its own set of nodes, validators, and applications. Each of these shards will feature a portion of the Ethereum blockchain and take the form of a full-fledged blockchain, with overlaps for security.

In addition to the scalability gain, there will also be a decentralization gain. Indeed, as the Ethereum blockchain will be divided into small parts, the prerequisites for running a node will be reduced. Therefore, access to these services will be available to more people.

According to the Ethereum roadmap, the number of shards will be increased over time. This is for the sake of security and performance control. It remains to be seen how sharding should be implemented on Ethereum, as there are several options.

Several sharding possibilities

The definition given above is the most classic form of sharding: one where the entire blockchain is divided into several chains, each having all the functionality of the mainnet. However, this form involves many problems and is actually very complex to implement.

Imagine that a block in one of the shards is invalidated. As the shards communicate with each other, it may be necessary to shut down the entire blockchain and return to a previous, healthy state. Moreover, such a solution is extremely complex: it is necessary to create systems allowing transactions between shards, others ensuring that each shard is on the same page, etc.

It is for these reasons that Vitalik and the Ethereum team have opted for a much simpler sharding solution, in which the shards will not support the execution of transactions or smart contracts. Sharding will only focus on data accessibility.

Thus, each shard will store part of the data of the Ethereum blockchain. They will therefore be stored like a file explorer on a computer, hence the gain in scalability when coupled with layer 2 . Indeed, it is easier for them to read and write in an ordered database. Just as it is easier for a human to find information in a binder than in a large draft sheet.

The latest feature of The Surge is “Data Availability Sampling” (DAS). To put it very simply, it is a sophisticated technology that will allow nodes to verify that all data on the blockchain exists and is true without having to download the entire blockchain itself.

Today, before the implementation of DAS, it is necessary for certain nodes to store the entire blockchain in order to verify the entire database, something which will therefore disappear with the arrival of The Surge.

The Verge, arrival of the “Verkle Trees” concept

The “Merkle Trees” and the notion of the “Ethereum State”

Before diving into the concept of “Verkle Trees”, it is important to understand the two technological aspects of “Merkle Trees” and the “Ethereum State”. These are indeed central to the architecture of Ethereum. It is therefore crucial to know how it works.

The Ethereum State, or “World State”, represents the state of the blockchain at a given time T. In other words, it is a variable that contains absolutely all the information to define the current inventory of the Ethereum blockchain.

In particular, we find all the accounts linked to their public address and their balances of ETH and tokens of the different standards, but also all the applications,  accompanied by modifiable storage and their immutable source code.

This  World State is in the form of a gigantic tree, called “Merkle Patricia Trie”, which, when encrypted, takes the form of a  Merkle root. In other words, the entire state of the Ethereum blockchain is kept in a  very large sequence of letters and numbers which, when decrypted, takes the form of a tree.

Figure 3: Visualization of Merkle Trees

The idea of ​​“Stateless Clients” and its advantages

With Merkle Trees, verifying the transactions of block N requires access to the previous state of the blockchain, to allow it to be updated. Thus, if a node (and this is their goal) wishes to verify all the next blocks, it must have access to the entire history of the state of the Ethereum blockchain, and this is for security reasons.

The problem is that this database is heavy and only gets bigger over time. This, therefore, constitutes a significant obstacle to decentralization, because the prerequisites are relatively high. To overcome this problem, the Ethereum Foundation will bring into play the “Stateless Clients”.

These new clients (software used to verify blocks) do not require the entire state history to work, hence the name “stateless”. Instead, they use so-called “Verkle” proofs ensuring the validity of the information present in the block to be validated.

This has many advantages. Indeed, new nodes can inject themselves directly into all validators without having to download the entire state history of the Ethereum blockchain.

Therefore, validator nodes can be lighter and therefore accessible to more people, which increases the security of the blockchain. In a January 2022 interview, Vitalik speculates that a simple cell phone would then be able to spin a Node.

The new concept of “Verkle Trees” and “Verkle Proofs”

What are these “Verkle” proofs that magically allow blocks to be verified without having access to previous blocks? They accompany each block and are divided into two parts:

  1. The first is a list of parts of the Ethereum State that have been read, written, or replaced in the block that needs to be validated.
  2. The second is proof that these parts of the Ethereum State have been accessed and/or modified correctly.

In reality, these proofs are not new and could have been implemented before on Ethereum. However, the Merkle Tree architecture would have involved very heavy proofs, having a significant impact on the performance of the blockchain. With the transition to the Verkle Trees, these proofs will be much lighter.

Verkle Trees are a new and very complex technology using vector engagement as a replacement for hashing, making everything more efficient. Its operation is too advanced in the context of this article. You can, however, check out the Ethereum Foundation article if you want to know more.

The Purge, or how to optimize Ethereum history

Dump node and validator history

As of this writing, a full node wishing to participate in the Ethereum blockchain consensus is required to download all network history. This includes all blocks and therefore all transactions since the start of Ethereum. All this data is very heavy, a few hundred gigabytes and it should get worse with sharding.

Thus, like the storage of the state history, this constraint constitutes a major obstacle to the adoption and decentralization of Ethereum. With The Purge, a concept called “  history expiry  ” will be implemented. Thus, the nodes will no longer have the obligation to store blocks older than one year.

However, some apps or rollups require access to older data. It is for this reason that responsibility for storing anything older than one year will be transferred to external entities such as decentralized protocols. In this way, the storage of large amounts of data will be entrusted to specialized applications, making the process more efficient.

Multiple methods to access history

There are many methods, centralized or not, that provide access to the history of the blockchain. The best known are explained below:

  • Centralized applications such as Etherscan or Etherchain. They are very practical, but their centralization obviously poses a problem in the event of censorship or attack;
  • Portal Network, a decentralized application developed by Ethereum developers, which asks each of their nodes to store a small random piece of history;
  • Third-party decentralized applications such as The Graph, are already widely used in place of nodes for execution speed reasons.

The Splurge, the catchall of the Ethereum roadmap

The Splurge is sort of the catch-all of the new Ethereum roadmap. It contains a number of small minor updates. Among them, we can discern two, very fashionable new blockchains.

The concept of “Account Abstraction”

Also called account abstraction in French, this technology is very recent and is increasingly used in new blockchains like StarkNet. The idea is simple: all accounts are smart contracts. Thus, there is no longer an “Externally Owned Account” (EOA), the basic Ethereum account.

This concept brings many advantages. These are mostly about friction reductions, and helping with cryptocurrency adoption. Indeed, each account could be customized at the convenience of the user. The possibilities are limitless, from creating multiple sub-accounts from the same main account (checking, savings, etc.) to setting spending limits or even securing private keys.

The use of “Zero Knowledge Proofs”

With The Splurge, Vitalik and his team want to integrate Zero Knowledge (ZK) proofs as much as possible. The goal is that only the node that creates the block needs to run the Ethereum Virtual Machine (EVM). Indeed, he alone is obliged to verify the transactions by generating proof, which will suffice to prove that the block is valid.

As of this writing, every node must execute every transaction in every block, and this is because there is no way of knowing whether whoever creates the block is honest or not. Something that changes with zero-knowledge proofs. Again, the consequence of such an update is the reduction of friction and an improvement in the general efficiency of Ethereum.

Conclusion after The Merge

You will surely have noticed that almost all of these updates go in the same direction: to improve the efficiency of the Ethereum network and make it more accessible. And this, by the implementation of new technologies, is more efficient than the current technological stack.

This roadmap looks very complex and busy, and it is. However, it is important to note that for Vitalik Buterin, only the first two phases are absolutely necessary: ​​The Merge and The Surge. The other three are more long-term oriented and offer lesser benefits than the first two.

2 thoughts on “What will the future of Ethereum (ETH) look like after The Merge?

  1. Pingback: What will the future of Ethereum (ETH) look like after The Merge? – DarkFiberMines.com

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