What is Ethereum Merge? - Here's What You Need to Know

In a major update known as "the merge," Ethereum switched from using energy-intensive technology to a more sustainable system a few minutes before 3 AM Eastern time on Sept. 15. The price of Etherereum (ETH) — the platform's native cryptocurrency — remained relatively stable in the hours following the merger. It was only 5% lower nine hours after the merger compared to the price at the time of the transition.

Blocks of new transactions were moved from being verified by computers solving massively difficult math problems to a system that uses financial incentives and penalties to accomplish the same task. This modification has the potential to reduce network power consumption by more than 99.95%.

What Should Investors Know About The Merge?

• Gas fees and transaction speeds would not change. Congestion and high transaction costs, including gas fees, have long been a source of contention for Ethereum. The merger had no immediate effect on either of these issues.
• The issuance of new coins has slowed. Because mining rewards, which are larger than staking rewards, are no longer paid out, the rate at which new ETH tokens enter circulation has decreased by about 90%.
• Scams may be on the rise, so be cautious. Ethereum warns users to be wary of scammers who claim you need to upgrade or transfer to a new token, such as "ETH2." There is no such token.
• Power concentration could be increased. Following the merger, the network will be propelled forward by the wealth of stakeholders rather than computing power. As a result, the largest owners, including custodians, could wield enormous power in the Ethereum ecosystem, reversing the decentralized ethos that so many cryptocurrency supporters value.
• Sharding will be feasible. Sharding divides validation work into smaller chunks, allowing the network to process more transactions. This could increase the number of participants in the Ethereum network by allowing devices such as phones to become nodes, potentially alleviating the congestion described above. But here's the catch: sharding is only possible after the merge. It does not yet exist on the Ethereum network, but developers plan to add it next year.

Next Steps for Ethereum Merge

The Merge was only the first of five steps in Vitalik Buterin's grand plan to transform Ethereum into a "decentralized world computer." It concentrated on lowering the network's energy consumption and changing its consensus mechanism, but it had little impact on scaling. Ethereum is still limited to 15 transactions per second. Vitalik, on the other hand, has a master plan to 5000x Ethereum's capacity to 100,000 transactions per second.

• The Surge

The Surge will be the first upgrade and will be familiar to most Ethereum users. It focuses on sharding to improve Ethereum's scalability. In the past, Vitalik Buterin has praised sharding and explained why it is a viable scaling solution for Ethereum's roadmap.

• The Verge

When the Surge is finished, the Ethereum blockchain is expected to grow at an incredible rate. As a result, the third step is "stateless validation," in which validators are not limited by hardware requirements in order to participate. This stateless validation will be accomplished using a highly technical concept known as "Verkle Trees." The goal is to convert the existing Merkle Trees (a method of securing the verification of a block's content) to a new, more compressed format. This will result in a tenfold increase in the amount of data required to store the Ethereum blockchain.

• The Purge

When Ethereum is upgraded to a stateless version, it can purge old state data and reduce the amount of data required by validators. According to EIP-4444, instead of storing the entire history of the blockchain, validators will only be required to store one year.

• The Splurge

Buterin has described the next part, the Splurge, as "the fun stuff" once all of the previous parts have been combined. Its goal is to ensure that the network continues to run smoothly and that the protocol updates discussed in previous sections do not cause any problems. The difficult task of making Ethereum more scalable will be completed.
This ultimate stage is still in the distant future; as with all technological development, there will undoubtedly be setbacks along the way. Given that the Merge took much longer than expected, the Splurge, when it arrives, will be a well-deserved celebration for the Ethereum network.

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