What Is the Ethereum Merge and How It Affects Despace Protocol

The Ethereum Merge was one of the most highly anticipated events in the cryptocurrency world. The Merge shifted the Ethereum network from its Proof-of-Work (PoW) consensus algorithm to a new Proof-of-Stake (PoS) mechanism. 

It was a significant upgrade to the Ethereum blockchain that has significantly reduced Ethereum's carbon footprint and improve its capabilities. It was completed on Thursday morning, September 15, 2022.

In 2020, Ethereum launched a PoS called the Beacon Chain.However, the Beacon Chain was not utilized for transactions before the Merge. The Merge on September 15 completed Ethereum's PoS transition by merging the main chain with the Beacon Chain.

This Merge event eliminated the PoW mechanism from Ethereum's consensus and significantly reduced Ethereum’s energy consumption by more than 99%. Both crypto enthusiasts and critics have greatly welcomed this move because, previously, Ethereum consumed huge amounts of energy, surpassed only by Bitcoin itself.

The Merge has shifted Ethereum's consensus mechanism from PoW to PoS, but is this change really worth the effort and fanfare? According to the Ethereum Foundation, the answer is an emphatic ‘yes’. The main argument is that Ethereum needs to modernize itself and cut its energy usage substantially.

As we all know, governments all around the world have been struggling to cut energy usage and manage their commitments against climate change. Ethereum itself has been criticized by many blockchain skeptics due to its high energy consumption. With the transition to PoS, it's believed they will finally be able to shut down the skeptics' argument.

Nevertheless, some PoW supporters believe Ethereum's transition to PoS might put a bigger risk to Ethereum's security itself. They claim that PoS will always lead to centralization since the richest people will always be able to stake more ETH and even split their own stakes across multiple validator accounts. 

Since Ethereum has become the biggest PoS network in the world after the Merge, it remains to be seen how secure the Ethereum blockchain will be compared to the pre-Merge era.

Ethereum developers set the Terminal Total Difficulty (TTD) at 58,750,000,000,000,000,000,000 - which was completed on September 15, 2022.

Put simply, the TTD is a metric that allows the blockchain to keep a rough track of time. Setting the TTD to the figure they have means that, with decent accuracy, the Ethereum Foundation can set a time for the Merge.

Many in crypto ask the same question: "Will the Merge reduce Ethereum's transaction fees?" This is an important question as Ethereum is notorious for expensive transaction fees, especially during the peak of a bull market, like late 2021.

Unfortunately, the answer is no. The Merge will not decrease Ethereum transaction fees. The next big update (Sharding) will be able to significantly reduce Ethereum fees, but it won't be deployed until at least late 2023.

The good news is that Ethereum already has a couple of working layer-2 rollups (such as Arbitrum and Optimism) that help Ethereum users access the network for much lower transaction fees. The Sharding update that we mentioned above will also work synergically with these layer-2 rollups.

Another very common question is the transaction speed post-Merge. In the new PoS network, Ethereum's average transaction speed increases slightly. Pre-Merge Ethereum could issue a new block every 13-14 seconds. Post-Merge, this block issuance becomes 12 seconds.

For most users, this doesn't sound like a major improvement. However, on the scale that Ethereum operates, this change is significant and accounts for an increase in block issuance of around 14%. For high-volume and advanced traders, this is a big difference.

For regular users, you might not notice this change too much. Just like in the previous section, we suggest layer-2 rollups if you’d like faster transaction speeds.

Post-Merge, some Ethereum miners have decided to fork the Ethereum chain in order to maintain the PoW consensus. The main motivation is so that the miners can continue using their PoW mining equipment which, in many cases, requires a sizable financial investment.

This forked chain is called EthereumPoW and the cryptocurrency ticker is ETHW. If you have been HODL-ing some ETH pre-Merge, you might get some airdrops of this new ETHW coin. However, be careful—the price of ETHW might become very volatile.

Just like when Ethereum split with Ethereum Classic, the main chain (in this case, the PoS chain) will likely see the most activity. In addition to volatility, there may be security risks on the smaller chains.

Before the Merge, miners made money by validating transactions in the PoW network. Post-Merge, these miners have been replaced by validators. In order to become a validator, you will need to stake 32 ETH, and you also need to have some technical knowledge before you can set up your computer to become the validator.

You can already stake 32 ETH right now. The staked ETH will be locked up for around 6-12 months post-Merge time.

There are also validator pools that you can join by contributing a smaller amount of ETH.

DeSpace Protocol is an all-in-one multi-chain DeFi platform. There are too many fragmentation problems in the crypto space, and DeSpace is attempting to fix them by creating a unifying solution. 

The Ethereum Merge will help DeSpace Protocol achieve our objectives. As explained above, the Ethereum Merge is one step in a line of big updates. In the future, Ethereum will introduce its sharding solutions that will work synergically with layer-2 rollup solutions such as Arbitrum and Optimism. 

This will push more users to look at cross-chain activities (for example, between Ethereum-Arbitrum and Ethereum-Optimism). DeSpace Protocol will benefit greatly from these cross-chain activities as DeSpace unifies DeFi apps that are scattered across different chains.

At the time of this article's publication, DeSpace has launched DeSwap, a working multi-chain DEX that will help Ethereum cross-chain users swap through one single DApp on various networks.