Explaining the upcoming upgrades for Ethereum
Ethereum currently operates using a Proof-of-Work consensus mechanism like Bitcoin. As you're probably aware, this consumes a lot of electricity. Miners use expensive hardware to compete to solve complicated problems to win the block reward.
This creates a barrier to entry. You can't just go and start mining $ETH on your laptop. Miners need to have specialized hardware and access to cheap electricity. This obstacle makes it harder for the network to become more decentralized.
You can read more about the Ethereum energy consumption here:
Ethereum Energy Consumption | ethereum.org
If you think these stats are incorrect or can be made more accurate, please raise an issue or PR. These are estimates by the ethereum.org team made using publicly accessible information and the current Ethereum roadmap. These statements don't represent an official promise from the Ethereum Foundation.
In a PoS blockchain, validators stake their ETH to verify transactions in exchange for a transaction fee.
Instead of competing to solve a computational problem, validators are selected randomly.
The probability of being selected to validate a block is proportional to the amount of ETH staked.
ETH 2.0 consists of 3 phases
- Beacon Chain (Launched Dec 2020)
- The Merge (Launching Q2 2022)
- Sharding (Launching 2023)
1. Beacon Chain
This is a separate chain from the Mainnet that is currently running using a PoS consensus mechanism.
The Beacon Chain was launched in December 2021 to set up the foundation for @ethereum to switch to PoS.
2. The Merge
This is where the Mainnet and the Beacon Chain merge, so that the Ethereum Mainnet (where all the activity currently takes place) also starts using Proof of Stake.
This will launch within a few months (sometime in Q2 2022).
3. Sharding: the solution to $ETH's scaling problems
Currently, @ethereum can only handle ~15 txs per second. After sharding, ETH will be able to handle many thousands of tps. Sharding allows ETH to scale by splitting the blockchain into "shards" (separate chains).
This will also lower the entry barrier as validators would only need to store/run data for a subset instead of for the entire blockchain. This will make it possible to run an Ethereum node from a laptop or phone => more decentralization. But Sharding isn't expected until 2023.
This concept is commonly used in web2 for scaling databases. The same principles will now be used to scale ETH.
Now, getting back to the Merge.
After the Merge
Ethereum will be using Proof-of-Stake, instead of Proof-of-Work
Issuance and Inflation will also change after the Merge.
According to the simulation tool on ultrasound.money:
- Issuance will go from 5.4M $ETH/year to 0.5M (90% reduction)
- Total supply growth will go from +1.9% per year to -2.2%
- ETH will become deflationary - or at least a lot less inflationary. • More decentralization (potentially) since PoS is more accessible than PoW.
- Staking rewards will increase from ~5% to 7-12% after the merge. (@LucasOutumuro from @intotheblock made a model for this)
Before vs After
Ethereum’s Growth - Ultrasound Money? 🦇 🤑
The growth is astounding. NFTs, DeFi, Payments, Metaverse, etc are all verticals that are growing like crazy.
ETH is the base layer for a lot of this activity.
ETH is also the most popular chain for NFT transactions by a mile.
Over time, more usage of the Ethereum network means more ETH burned.
Some interesting readings 👇
Here's an amazing video by @thekriskay where he explains ETH 2.0 and The Merge:
I always find that @VitalikButerin has a great way of explaining things - it's always refreshingly different from others:
And of course, @finematics made an excellent animated explainer video about ETH 2.0:
You can also try simulating the merge and see the impacts on issuance and token supply at
The planned upgrades to ETH are no longer called ETH 2.0 or Eth2. You can read about the logic for this decision here.
The great renaming: what happened to Eth2?
Ethereum is a protocol undergoing significant changes. Client teams are upgrading the protocol to scale to meet global demand while improving security and decentralization. Beyond protocol development, a critical shift in Ethereum has been the movement away from 'Eth1' and 'Eth2' terminology. As of late 2021, core developers stopped using the...
While sharding is still a part of the planned upgrades, the shard chains are meant to provide extra data availability to rollups to achieve ~100,000 tps.
Understanding Ethereum's rollup-centric roadmap
Preface: Since I often post about rollups in this blog, I thought pinning this older article will be helpful. Originally posted here. It feels to me like there's a lot of confusion around Ethereum's roadmap, with a common perception being "Ethereum 2.0 is the next version of Ethereum that'll replace the current version".
Read more about L2s and Rollups in our page about it