🔹 The plan in the 2014 white paper was finally realized eight years later, but the market did not rise as expected.
🔹 Ether fell to its lowest point since July, reversing all gains since mid-July.
🔹 Shanghai Upgrade is expected to open staking and withdrawal for upgrading, but there are still many uncertain factors.
🔹 Lido and Coinbase control more than 40% of the nodes in the Ethereum network, causing concern in the community.
It has been a week since the beginning of a new epoch for the Ethereum network following the historic termination of the proof-of-work (PoW)
mechanism. The energy-consuming consensus protocol, which has been used for eight years, was finally scrapped for a more sustainable proof-of-stake (PoS)
mechanism. However, the upgrading performance did not seem to be as "lively" as people imagined, and the market was still struggling in a long bear market. Even after the Merge, Ethereum once fell to $1,489, along with Bitcoin
The End of the Mining Era
The Merge was triggered when Ethereum blockchain reached a Total Terminal Difficulty of 58,750,000,000T at 14:43 on September 15, 2022 (Beijing time), and the final PoW block was dug out by F2Pool. Meanwhile, the Ethereum executive layer and beacon chain were merged to generate the first PoS block. Since then, Ethereum has officially transformed from PoW consensus mechanism to PoS consensus mechanism.
The transformation of the PoS consensus mechanism written in the white paper in 2014 was successfully implemented eight years later. The Merge can be viewed as rewriting the laws of physics. Proof of Work utilizes real-world functionalities such as electricity, hardware, and computers. The mining era came to an end. Vitalik Buterin said excitedly on Twitter, "The Ethereum Merge is complete! This is a significant moment for the Ethereum ecosystem. Everyone who helped to achieve the Merge should be very proud."
Soon after its inception in 2015, Ethereum announced its intention to transition to a proof-of-stake protocol. The transition has been faced with constant delays that were touted at the time as giving the team more opportunity to prepare.
This delay went on for eight years. Within these eight years of proof-of-work, Ethereum miners saw a record income of over $830 million in January 2021. The network has also recorded a whooping 626, 700 contract addresses, 122,374,074ETH in circulation, over 15.5 million blocks. The success of decentralized finance (DeFi) has allowed miners to make significant profits in particular. These numerous DeFi platforms have increased the number of on-chain transactions and activity on the Ethereum blockchain, which has caused fees to soar and processing times to lengthen. Increased transaction costs are being borne primarily by end users. For a long time, Ethereum has been accused of high gas fees and excessive energy consumption leading to climate change. However, after the upgrade, according to the Ethereum Foundation, switching to Proof-of-Stake reduces the blockchain's power consumption by 99.95%.
Successful Merge, disappointed Drop
In more than a month before the Merge, the community and even the entire crypto space have played up the feeling that the price of ETH would rise immediately with successful Ethereum Merge. Users considered this upgrade good news, but this was not the case. After the Merge was successful, the price of Ethereum fell from $1,777 to $1,650, and Ethereum fell nearly 20% within the week when the Merge was completed. On September 22, the Ether fell to its lowest point since July, reversing all its gains since the middle of July.
It is also worth noting the selling pressure brought by the Ethereum whales. According to Santiment, in the six days after the successful Merge, the addresses holding 1,000 to 10,000 ETH have decreased their cumulative holdings by 2.24%, and the addresses holding 100 to 1,000 ETH have decreased their cumulative holdings by 1.41%.
What Is the Future of Ethereum in Post-Merge Era
Regardless of the response, the Merge ended smoothly after all, but the Merge is not the last step of Ethereum, it is expected that in 6-12 months, Ethereum will conduct the Shanghai Upgrade. The Shanghai Upgrade will deploy the EIP-4895 proposal
, the main content is to solve the withdrawal problem of Ether staked on the beacon chain. After the deployment is completed, users can withdraw the Ether staked on the beacon chain, but before the Shanghai Upgrade, users can only deposit instead of withdraw. According to the official website of Ethereum, the total amount of staked Ether has exceeded 14.62 million, with more than 430,000 validators, who will not be able to withdraw Ethers until the Shanghai Upgrade is successfully deployed.
Apart from addressing the staking and withdrawal issue, little is known about the Shanghai Upgrade. Marius Van Der Wijden, a core Ethereum developer, admits that the biggest problem with the Shanghai upgrade is that each core developer has a different checklist. Everyone believed that their proposal was the most urgent, which created a lot of uncertainty about the next upgrade.
However, Ethereum still has a problem that needs to be solved before it moves to the Shanghai Update -- the risk of centralization. Two addresses control 46.15% of the nodes in the Ethereum PoS network, according to Santiment data. The first address has a stake of 28.97%, generating the validation of up to 188 blocks alone, while the second address has a stake of 16.18%, giving a validation of 105 blocks. Altogether, these two addresses have validated 293 blocks, up to 46.1% of all validated blocks.
Martin Köppelmann, the Gnosis co-founder, disclosed in a tweet that Lido and Coinbase were the owners of these two addresses. According to him, "420 of the previous 1,000 blocks have been generated by only Lido and Coinbase".
These data have sparked discussion in the community about the excessive centralization of Ethereum, and raised doubts and worries about whether Ethereum can become more decentralized after the Merge.
We have to acknowledge that the Ethereum Merge was late but eventually successful, and as Glassnode states, it was an engineering feat. The macro environment is challenging, the short-term price drop may not mean anything, and the Merge is not the end of Ethereum, but a new starting point. People are always wondering if Ethereum can overtake Bitcoin
. Maybe we can take a different approach and try to expect to see both of them stand distinctly above all others.
Author: Gate.io Observer: Jill Ma&M. Olatunji
Translator: Joy Z.
* This article represents only the views of the observers and does not constitute any investment suggestions.
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