The Merge of Ethereum is the most significant change in the short history of the Ethereum protocol, and it has important implications for the crypto world in general, and web3 in particular. Because the merger works to address some of the previous criticisms of public chains, such as why people can’t use blockchain technology widely in their daily lives. After the merger, Ethereum has the potential to demonstrate to the public the importance of the technological progress. Not only that, but the usefulness of web3 is becoming more and more evident, and Ethereum as well as other protocols have elevated the typical use cases of digital banking and DeFi.
For the past 8 years, Ethereum has been using the much-maligned PoW proof-of-work model to create tokens and run the public chain. Proof of work is a consensus mechanism in which nodes in the network compete for computing power, and ensures that all activities on the chain are in compliance with the rules through encryption algorithms. But PoW proof-of-work relies on increasing difficulty to ensure its consensus, which means Ethereum consumes more and more energy as crypto miners have to solve increasingly difficult problems to prove the state of the network. Therefore, it has also been argued that the development of NFTs and cryptocurrency projects is unsustainable given the power consumption generated by proof-of-work.
That changed with the completion of the Ethereum merger. The combined PoS proof-of-stake model replaces the PoW proof-of-work model. In short, a merger removes the need for large amounts of mining power and introduces a more sustainable way to reach consensus. This process is called merging because the beacon chain has actually been running alongside the Ethereum mainnet for quite some time. During this time, the beacon chain has been collecting validators while preserving the previous history of the Ethereum network, ensuring that only the consensus aspect is affected.
Changes in the protocol layer
Below, we will review from a technical point of view what changes have occurred in the merger. From a technical point of view, the merger also represents a separation of the inner layers of the Ethereum protocol. Essentially, there will be multiple clients with different roles, but they can communicate with each other if needed.
Before merging, everything was bundled into one client. After the merger, there are two clients. One of the clients handles synchronizing the network state (the consensus layer), while the other client (the execution layer) focuses on smart contract execution, block production, and storage. The glue that holds these parts together is called the Engine API, allowing each of these protocol layers to communicate seamlessly with each other.
From a security perspective, the separation of the protocol layers is actually quite important. For example, suppose Ethereum’s execution layer has a critical bug that allows transactions to be rolled back. If this execution layer is used by most of the network, then Ethereum itself could be compromised. However, with the separation of protocol layers, client diversification is very important to Ethereum’s security, as it reduces the network’s reliance on a single client or execution layer.
Implications for web3
What Web3 currently lacks is simple and easy-to-use applications, or popular apps. A large part of the reason for this is that it is difficult for developers and companies to adapt to building dApps based on PoW. Since Ethereum is the only mainstream public chain capable of building any kind of real-world application on a distributed ledger, the merger brings Ethereum one step closer to achieving wider adoption.
Not only that, but the merger reduced Ethereum’s power consumption by 99.95%. As power consumption is often cited as a reason why blockchain cannot be widely adopted, the merger successfully demonstrates the feasibility and evolvability of blockchain technology and the web3 as a whole.
In fact, the blockchain should not be the whole of web3, but rather the fusion of various technologies that allow the real creation of web3. In the future, blockchain may just be part of that stack, similar to how the backend is part of a full-stack application. In other words, the Ethereum merger is just the beginning of the normalization of web3 technology. Ethereum’s move from PoW to PoS will enable better usability and move the blockchain industry in a positive direction. Improvements in blockchain will profoundly affect other aspects of web3, returning power and data to users, which in turn allows for greater adoption and normalization of applications.