Ethereum remains the no.1 network by DeFi TVL ($35 billion), but it’s in urgent need of scaling. The project to scale Ethereum is known as ETH 2.0, and it’s being implemented through a series of forks and upgrades with names like Muir Glacier and Altair. We’ll look at these major updates, how they help the network evolve, and going to check further Ethereum improvements.
Since its launch in 2015, Ethereum has proven itself a very successful decentralized blockchain with smart contract functionality. However, high demand brings a lot of issues that have to be solved: frequent lags, high fees, and a long time to finality.
To upgrade the network and make it faster and cheaper, the core developers came up with a complex plan called interchangeably Ethereum 2.0, Eth2, or Serenity. Note that it’s not a new coin, but rather an update of the existing network. The main advantages of this set of updates are:
- Improved scalability
- Lower gas costs
- Proof-Of-Stake instead of Proof-Of-Work — reducing the carbon footprint
- A burning mechanism
- Improved sustainability
- Better security
Let’s dive into the roadmap, realize where we are, and, finally, check what is going to come next in 2022 and beyond.
2020
Implemented on January 2, 2020, at block height of 9.200,000, when the price of ETH was $127
The key purpose of Muir Glacier was to address the issue of the so-called difficulty bomb. It had been introduced to encourage Ethereum nodes to switch from Proof-of-Work mining to Proof-of-Stake (PoS) validation. As the difficulty of Ethereum mining increased — first slowly, then exponentially — it would become harder for miners to make money. At the same time, the block reward kept going down: from 5 ETH it was cut to 3 ETH in October 2017 during the Byzantium update.
Eventually, the miners would have to switch to PoS, the consensus algorithm behind Eth 2.0. However, when the difficulty bomb was almost ready to explode, Eth 2.0 was nowhere near ready. The community needed a delay — and EIP (Ethereum Improvement Proposal) no. 2384 did delay the difficulty bomb for another 611 days.
Beacon Chain release
Implemented on December 1, 2020, when the price of ETH price was $586
The Beacon Chain is the core blockchain of Eth2.0. Its release is a key step on the way to transferring from the Proof-Of-Work consensus mechanism to Proof-of-Stake — simply put, from mining to staking. PoS consumes up to 2,000 times less energy than PoW.
To become a validator in the Eth 2.0 PoS network, one should stake at least 32 ETH. The stake can be withdrawn only once ETH 2.0 is completely implemented. Those who don’t have enough ETH can join special staking pools. The minimum number of validators needed to start Phase 0 of Eth 2.0 is 16,384; as of March 2022, there were over 300,000 of them.
2021
Berlin
Implemented on April 15, 2021, when the price of ETH was $2454
The Berlin upgrade optimized gas costs, increased support for multiple transaction types and improved the overall security of the network. It included the following Ethereum improvement proposals: EIP-2565, EIP-2929, EIP-2718, and EIP-2930.
Why ‘Berlin’? The first-ever Ethereum DevCon was hosted in Berlin in 2014. The second DevCon took place in London, so you can guess how the next major update would be named.
London
Implemented on August 5, 2021. when the price of ETH was $2621
London was one of the most important and anticipated updates. It aimed to finally solve the problem of high transaction fees because Berlin hadn’t helped much with this issue. The upgrade included EIP-1559, EIP-3198, EIP-3529, EIP-3541, and EIP-3554, but the key improvement proposal was EIP-1559, first submitted by Vitalik Buterin himself back in 2018. Here are some of its general points:
- New gas fee structure: instead of a single gas fee, there was now a combination of a base fee and a priority fee. The base fee is determined by the network and burned after the transaction. The priority fee is an optional ‘tip’ to encourage the miners to process the operation faster;
- Dynamic block size;
- A deflation mechanism: the base fee is burned. This means that the miners earn less, but on the other hand, there is now deflationary pressure that should support the price of ETH.
In addition, the difficulty bomb was delayed again till December 1, 2021.
Altair
Implemented on December 9, 2021, when the price of ETH was $4,111
Altair was the first scheduled upgrade for the Beacon Chain, which uses the Proof-Of-Stake consensus algorithm. It increased the penalty for inactive validators from 12% to 15% and added support for so-called light clients: now transactions can be verified even by nodes running on mobile phones.
While the update itself is nothing major, it will allow the developers to test how the Beacon Chain behaves after an upgrade. This makes Altair a huge step towards a working Eth 2.0.
Arrow Glacier
Implemented on December 9, 2021 (simultaneously with Altair) when the price of ETH was $4,111
This update pushed back the difficulty bomb by several more months.
2022
The Kiln testnet and the Merge
Implemented on March 15, 2022, when the price of ETH was $2591
Kiln is the last testnet before a complete switch from the current Ethereum to Serenity. It was launched in mid-March 2022 as a PoW network and was successfully merged with the Beacon Chain on March 15 (thus the Merge), so now Kiln runs on PoS, like all of Eth 2.0 in the near future.
What’s next for Eth 2.0?
The mainnet Merge
The next big step is merging the Ethereum mainnet with the Beacon Chain, which should happen this autumn. At that point, stakers will finally be able to withdraw their 32 ETH if they wish to. The Merge by itself is going to make Ethereum a deflationary asset (reduced issuance — check it below). And in addition, it cuts power usage by 99%.
The Triple Halving
This term refers to a radical reduction of the ETH inflation rate. Right now the ETH supply grows by about 4.3% a year (or 13,500 ETH per day), but after the Merge on the mainnet this will go down to 0.1–0.4%. Deflationary pressure, introduced in EIP-1559, will increase even more, especially since the higher the user activity, the more ETH is burned.
The Ice Age
The difficulty bomb will finally explode, and PoW mining will grind to a halt and freeze. There will be no point for any miners to stay with the old PoW network, and they will all switch to the new PoS chain — or leave completely. But we’ve already realized that attempts will be made to fork PoW chain so that miners could squeeze out all the juice from that chain. The relevance of this fork with the existence of Ethereum Classic remains questionable, imho
The Surge
Coming in 2023
Once Ethereum is stably running on PoS, it will be split into 64 subchains or shards. They will be able to process transactions in parallel with each other without competing for resources. Thus, sharding should dramatically increase capacity and scalability. In the very beginning, only a few parallel shards will be launched. The further we go — the more subchains will be launched.
Sharding will help to lower the costs of gas to the same level as in Polygon, Arbitrum, Optimism, and other Layer-2 solutions while keeping the security level high. Also, shards will provide cheap extra storage layers for applications and data. Against the odds, the fee price update is going to be changed right here. Not during the Merge.
The Verge
Verkle trees — while both Verkle and Merkle trees are having the same purpose, Verkle trees have their advantage — “If a tree contains a billion pieces of data, making a proof in a traditional binary Merkle tree would require about 1 kilobyte, but in a Verkle tree the proof would be less than 150 bytes”. Which is 666,(6)% more efficient.
Thus, this update is going to optimize storage and help reduce the node size and Ethereum will become much more scalable. The claimed 100,000 transactions per second are not far off. Moreover, the gas cost will be updated. The long-term extra is about implementing SNARKed Verkle proofs — as for me, (Zero Knowledge is taken out of brackets) Scalable Transparent Argument of Knowledge and Succinct Non-Interactive Argument of Knowledge are extremely technical things to be studied for a long time.
The Purge
The Purge update is about data storage. Some data(not people as it was in the movie of the same name) is going to be liquidated to clean up the ecosystem(R u sure we r talking not bout ppl?).
So it means that nodes will not have to store the whole data about the historical blocks permanently. Those data which is stored for > 1 year is going to be cleared up. This means that hardware requirements for nodes will decrease and the bandwidth of the network will reduce. That's it
The Splurge
“It’s “all of the other fun stuff.” (c) Vitalik
More precisely, Account Abstraction, Social Recovery and Key Rotation, Atomic Transactions, Ethereum Virtual Machine improvement track, zkSNARK everything, Post-Quantum everything, Ethereum Improvement Proposal-1559 improvements, and many many more. Let’s go through them one by one
Account Abstraction allows changing the wallet’s key. It’s a very raw technology that has to be studied. Potentially it may eliminate the need for private keys, passwords, confirmation times, transaction fees in native assets, etc.
Social Recovery and Key Rotation. For example — 3 users have to approve a single transaction to improve the security. Limiting the number of tokens to be sent — Solana drainers and Ethereum “set approval for all“ smart contracts? Not a problem anymore. Phishing address spoofing check. Possibility to recover forgotten keys and passwords and so on.
Atomic Transactions let people pay fees in ERC20 tokens. Or even using L2-based tokens
Post-Quantum everything will lead Ethereum to become quantum resistant. This means no one — even quantum computers — will be able to brute-force someone’s private keys/phrases/anything. I doubt you would like it if one day the data files that you stored somewhere in a blockchain became public. Or even simpler — you’ll lose all of your assets. That’s what post-quantum cryptography is focused on — We are lucky in the sense that quantum computers are not yet as widespread
EIP-1559 improvements — gas adjustments
So far, Ethereum is not even halfway through its journey to the finished product. New stuff about rollups may appear, some bugs may be found, and the possibility of a black swan appearance went nowhere…For the current period of time, we are experiencing the most dramatic changes in protocol. The further we go — the smoother the changes will be applied. Ethereum by itself is an indispensable part of the blockchain nowadays. Without Ethereum, it would be difficult to imagine the world of cryptocurrency as we know it
“We born too late to explore the Earth. Born too early to explore the stars. But born just in time to learn crypto”
26.08.2022
