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On September 15, the Merge finally happened, culminating in the transition of the Ethereum consensus mechanism from proof of work (PoW) to proof of stake (PoS). The transition is a milestone in getting on the road to building the final product that Ethereum founder Vitalik Buterin had dreamt of.
Over the next few years, it plans to work on the “execution layer” which will eventually create Ethereum that will increase the transaction and reduce gas fees. “After the Merge, Ethereum will undergo surge, verge, purge, and splurge,” Vitalik Buterin, co-founder of Ethereum, said during a presentation in July.
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Buterin argued that Ethereum supporters believe Ethereum is only 40% complete. Even after the Merge, which is expected to be completed this September, Ethereum will still only be roughly 55% complete. In the presentation, he also hinted at what is coming next after The Merge. The platform plans to bring Shanghai Upgrade, which is expected to take place in early 2023.
Ethereum Shanghai Upgrade
Ethereum developer Tim Beiko in his blog has given a detailed review of the upcoming Shanghai Upgrade. Three major upgrades are in the offing – Beacon Chain withdrawals, EVM object format and Layer 2 fee reductions.
According to the blog, activation of Beacon Chain withdrawals is a major feature for Shanghai. Currently, validators can’t withdraw staked ETH and staking rewards as it continues to be locked.
In the Shanghai upgrade, Ethereum will enable withdrawals. So, people who started staking will get their money back. “Validators can partially withdraw their accumulated rewards while maintaining the minimum requirement of 32 ETH stake to remain a validator and continue earning rewards,” mentions the blog.
Another major update will happen in the form of EVM Object Format. Developers are facing a grave challenge to improve the EVM (Ethereum Virtual Machine) without hampering existing contracts. The possible solution is to provide new functionality to contracts which are deployed with a specific identifier without disturbing the existing contracts. This is now known as EVM object format. The main object of the EVM object format update is to separate code from data, which will benefit on-chain validators such as layer-2 scaling tool provider Optimism.
The last thing is that the platform plans to reduce fees on layer 2 (L2). Since the full-sharding implementation isn’t ready yet, the platform plans to reduce transaction fees on L2 by lowering the cost of data on layer 1 (L1). This is called CALLDATA cost reduction.
There’s another way to reduce transaction fees – proto-danksharding, which might be announced in the upgrade. In this method, the capacity of data in each block will be increased, which could reduce the transaction cost on ETH L2 chains by 100x.
The Shanghai Upgrade is a precursor to coming updates that will eventually build the final product.
What the final product will look like
Vitalik said that Ethereum currently can process about up to 20 transactions per second. However, it could process, including the rollups and sharding, according to the maths, about 100,000 transactions per second.
Post proto-danksharding comes danksharding, which will introduce sharding on Ethereum. This is the final step to achieve Ethereum’s scalability and drastically reduce rollups cost. Rollups are second layers that sit on top of Ethereum and handle enormous quantities of transactions, bringing them to the main blockchain in batches. They also use a lot of data that increases transaction costs.
Danksharding further lowers transaction costs by allowing nodes to take only a ‘sample’ of the data instead of downloading it entirely.
Proposer builder separation (PBS) is introduced in the third development. This idea distinguishes between the labour-intensive process of block building and the more passive process of block validation. On the post-sharded Ethereum network, proposer builder separation will ensure that there are enough validators for decentralisation and data availability sampling.
In the final development, history and storage requirements for validators will be further reduced. Currently, history and storage requirements make it expensive to run a validator. These developments will maintain the Ethereum decentralisation by decreasing the cost and barrier to entry to run a validator.