📝 Introduction

If you are in the space of cryptocurrencies, you must have heard about the Ethereum blockchain update called the Ethereum Merge. This update was successfully completed on September 15th.

What is the Merge update?

The current Ethereum blockchain, where the smart contracts and rules of the Ethereum network are embedded, will become the "execution layer". The proof of stake or PoS chain becomes the consensus layer; Where transactions are confirmed through this mechanism. However, no new tokens issued and all existing ETH tokens on this blockchain will be usable.

Decentralization is at the heart of blockchain technology and cryptocurrency. There’s no central gatekeeper to manage a blockchain’s record of transactions and data. Instead, the network relies on an army of participants to validate incoming transactions and add them as new blocks on the chain.

In the PoS mechanism, instead of miners using computing power, users can stake their ETH token and act as a validator in the blockchain. ETH staking allows certain validators to be selected to propose new transactions to the blockchain. [1]

What is crypto sharding?

Sharding is a multi-phase upgrade to improve Ethereum's scalability and capacity. Sharding provides secure distribution of data storage requirements, enabling rollups to be even cheaper, and making nodes easier to operate. [2]

Sharding splits a blockchain company's entire network into smaller partitions, known as "shards." Each shard is comprised of its own data, making it distinctive and independent when compared to other shards. [3]

📃 Purposes of dashboard

The Merge update was successfully completed on September 15, and the consensus mechanism of the Ethereum blockchain changed from PoW to PoS. In this dashboard, the trend change of some indicators after the Merge event is analyzed.

✍🏻 Methodology

• In this dashboard, the following tables are used to extract information:
  • ethereum.core.fact_transactions
  • ethereum.core.ez_eth_transfers
• To check the amount of energy consumption in the Ethereum blockchain, data from the digiconomist site has been used;
  • https://digiconomist.net/ethereum-energy-consumption

Energy Consumption

Critics of Ethereum and other proof-of-work (PoW) cryptocurrencies have often pointed to the huge energy costs of mining. In recent years, one of the investment criteria of organizations and individuals has been based on environmental standards. In fact, many investors will consider investing elsewhere if they know that investing in cryptocurrencies will negatively impact the environment. “Staci Warden”, CEO of the Algorand Foundation, says:

> a cryptocurrency's energy consumption is a key factor in its ability to Scalability.

This is why the price of cryptocurrencies is under a lot of pressure in 2022. But Ethereum's consensus mechanism changed from proof-of-work to proof-of-stake (PoS) after the Merge event. This caused the energy consumption of the Ethereum blockchain to decrease significantly. The energy consumption of the Ethereum network from the beginning of 2022 to before the Merge event was equal to 83,837 GWh per day on average. Meanwhile, after the Merge event, the average daily ==energy consumption of the Ethereum blockchain has reached 33,500 kWh. On the other hand, the total energy consumed on the Ethereum blockchain from the beginning of 2022 until the Merge event was 21,343 TWh, while considering the average energy consumption of 33,500 kWh for the Ethereum network (based on PoS) until the end In 2022, the total energy consumption of this network will be equal to 3,517 MWh. The reduction in energy consumption in the Ethereum blockchain after the Merge event has been very impressive. This huge reduction in energy consumption can attract many investors to Ethereum, which can gradually increase the price of ETH in the long term.

Transactions Fee

One of the concerns of Ethereum blockchain users has been the high transaction fees. At the beginning of 2022, transaction fees on the Ethereum blockchain averaged over 0.01 ETH. Even on some days like May 1, 2022, the fees per transaction averaged over 0.07 ETH, but as we got closer to the Merge event, the transaction fees decreased. The results show that after the Merge event, the average fee of each transaction on the Ethereum network is equal to 0.0012 ETH, while before this event, the average fee of each transaction was equal to 0.0052 ETH. In other words, after the Merge event, transaction fees have decreased by about 77%.

The reduction of Ethereum network fees can attract many developers. On the other hand, low transaction fees can increase the activity of users on this blockchain.

But we know that Merge will not affect Ethereum transaction fees. However, Ethereum's high network fees may be addressed with future updates such as ==Danksharding== and ==proto-Danksharding==, although these updates will take at least until 2023 to be implemented. Rollups, or third-party networks such as Arbitrum and Optimism, which group transactions and process them independently of the main Ethereum network, are still the main solution to Ethereum's transaction fee problems.

Transaction per Second (TPS)

The Merge event has no direct effect on the number of transactions per second, while the results show the same.

After the Merge event, ==sharding== will be possible.

Sharding splits validation work into smaller amounts and allows the network to handle more transactions. This could increase the number of participants in the Ethereum network by allowing devices like phones to become nodes, all of which might address the congestion described in the point above. But here’s the kicker — sharding only becomes a possibility after the merge. It doesn’t exist yet on the Ethereum network, though developers expect to introduce it next year.

Number of Block per Day

In the PoW system, Ethereum blocks were generated every 13 or 14 seconds on average. Merge results in PoS blocks being issued at regular 12 second intervals. Most users won't notice this progress, and Ethereum is still lagging behind other blockchain networks like Solana and Avalanche (although it's far ahead of Bitcoin, which averages a new block mined every 10 minutes).

However, just like transaction fees, those looking for faster speeds can use rollups and other layer 2 solutions.

In the chart below, it is clear that after the Merge event, the total number of blocks generated per day has increased significantly. After the Merge event, the number of blocks generated increased by about 1000 blocks per day. (6,117 blocks → 7,106 blocks)

ETH Staking

Due to the change of Ethereum blockchain consensus mechanism from PoW to PoS, it is expected to see a change in ETH staking== trend. The results show that after the Merge event, the number of stakers has increased every day, so that the highest number of stakers in one day corresponds to 3 days after the Merge event, i.e. September 18. The desire of users to stake their ETH can be a factor in creating new platforms in the field of ETH staking.

💡 Conclusion

In this dashboard, the effect of the Merge update on some indicators and the change in the trend of some of these indicators after this update was analyzed. Some of the most important results are:

✅ The energy consumption of the Ethereum network from the beginning of 2022 to before the Merge event was equal to 83,837 GWh per day on average. While after the Merge event, the daily energy consumption decreased to 33,500 kWh.

✅ Although after the Merge event, we see a significant reduction in Ethereum network transaction fees, but the Merge event alone cannot reduce the Ethereum blockchain transaction fees, but after this event, with updates such as Danksharding and proto-Danksharding, it is possible to reduce the gas fees.

✅ After the update of Merge, the number of new blocks created in this network will increase by reducing the time intervals of new block creation from about 13.5 seconds to 12 seconds.

✅ The Merge update cannot increase the number of Ethereum network transactions. But after Merge, this possibility is provided with updates such as Sharding.

✅ As the consensus mechanism of the Ethereum network changes from PoW to PoS, the desire of users to stake their ETHs increases. On the other hand, we will see the creation of new platforms in the field of Ethereum staking.

Analyst: Emanoel

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Discord: Eman#9698

Special thanks to the Flipsidecrypto 🧡