The Ethereum Merge, previously known as Ethereum 2.0, is set to bring a planned set of upgrades to the Ethereum network meant to improve the blockchain’s performance and make the network more scalable, secure, and sustainable.
What is the Ethereum Merge?

Let’s first start with an overview of Ethereum.

Ethereum is a blockchain platform that functions as a ledger for ether (ETH), its native cryptocurrency, and whose main purpose is to store and run smart contracts, which are transactional programs written into the blockchain. Thanks to its ability to run smart contracts, the network also supports the development of decentralized applications (dapps) and the creation of new crypto tokens.

Ethereum is the brainchild of blockchain researcher Vitalik Buterin, who first proposed his blockchain idea in a whitepaper published in 2013. Vitalik’s vision attracted several similarly minded individuals who helped him build Ethereum. Together, they publicly announced the project in January 2014 and the project was successfully crowdfunded the same year.

As part of the Merge, the Ethereum network intends to move from a Proof of Work (PoW) system to a Proof of Stake (PoS) one. Users will then be able to lock, or stake, their ETH in a smart contract and earn a share of ETH for solving computations needed to add new blocks to the blockchain.

Importantly, the Ethereum Merge is no longer called Ethereum 2.0 because it is viewed as an upgrade, not a new network. Instead, the Merge is going to bring together Ethereum’s execution layer, its current network, and the consensus layer, the upgrades being built. More on that below.

Ethereum Upgrades

The Ethereum blockchain that is currently being used is called the Ethereum Mainnet and is known as the execution layer, where smart contracts and network rules reside. The consensus layer, what was previously called Ethereum 2.0, ensures that devices contributing to the network are acting in accordance to its rule.

Both networks are set to come together in an event named “The Merge”, which will remove the use of PoW and replace it with a PoS network.

Beacon Chain

The Beacon Chain was released in December 2020 as a means to test and develop the proof of stake mechanism for the consensus layer. This began phase 0 of the road to the Merge.

The Beacon Chain is currently running in parallel with the existing Ethereum proof of work blockchain and does not offer smart contract functionality.

Upon activation, a one-way bridge was opened to accept ETH for those who wished to stake their ETH tokens. Anyone with a balance of 32 ETH or more could access the beacon chain and start participating in the proof of stake consensus mechanism.

Staking ETH is what activates validator software to be able to store data, process transactions and add new blocks to the blockchain. In other words, staking is essential to making the PoS protocol function as intended. Validators can lose their staked ETH for any malicious action, going offline or failing to validate transactions.

Note: the one-way bridge does not allow users to unstake their ETH until the Merge is complete.

Ethereum Shards

If you consider that the Ethereum blockchain, at its core, is one big database of transactions, sharding essentially allows that one big database to be split into smaller interconnected pieces, called shards.

The Beacon Chain will be responsible for randomly assigning stakers, also known as nodes, to be able to validate shard chains once sharding is enabled, a key component towards ensuring that no collusion takes place where nodes band together to take over a shard.

Each validator node assigned to a shard will only contain a subset of the Ethereum blockchain and thus are no longer required to store Ethereum’s entire transaction history. While the aim of sharding is to make the blockchain more lightweight and therefore faster, this mechanism also helps with decentralization. Nodes do not process and store all the information, but all information contained in a shard can still be shared among other nodes, helping keep the ledger decentralized and secure.

In total, Ethereum is set to spread the network load over 64 shards and is a system created to support more transactions. Once the Ethereum shards are live, the Ethereum blockchain will be able to accommodate up to 100,000 transactions per second, up from 30 transactions per second prior to the Merge.

When is the Ethereum Merge?

The Merge will have occured when the PoS Beacon Chain comes together with the existing PoW Mainnet chain. With that, Mainnet will bring the complete history of Ethereum and the ability to run smart contracts to the Proof of Stake network.

By mid-September 2022, this event will mark the end of Ethereum’s PoW network and the transition should run smoothly for all current ETH holders and users of the Ethereum Mainnet.

The addition of the 64 shards is set to occur post-Merge, at which point the transition will be complete.

How to buy ETH

You can buy Ethereum coin and stake it on Bitstamp and earn 4.21% APR. Learn more about staking with Bitstamp.

After the Merge, the earnings are expected to improve significantly. Take advantage of the Ethereum Merge with Bitstamp and start staking ETH today!

Please note that, while there may be some small delays in ETH transactions, the Ethereum Merge will not affect you as a Bitstamp user. Therefore, no action is needed prior to the Merge.

Lastly, you can buy ETH at Bitstamp with 0% fee up to $1,000.

Get started

Disclosure: Bitstamp is licensed to engage in virtual currency business activity by the New York State Department of Financial Services.

Ready to purchase crypto?

Get started