The long-awaited merge to Ethereum 2.0 is slowly happening, but why is Ethereum merging and what else is happening aside from just the merge to proof of stake?
The Issue Blockchains Currently Face
There are three properties which every blockchain possesses: decentralization, scalability, and security. The issue that blockchains face is the ‘Blockchain trilemma’ which is the phenomenon that a blockchain can only optimize two of these three properties. This is because blockchains are monolithic, meaning everything happens on one chain.
There are three components of a blockchain: data availability, consensus, and execution. Monolithic blockchains house all three of these components which subjects them to the ‘blockchain trilemma’.
There are a few scenarios for a monolithic blockchain:
· Scalable and secure: Decrease the amount of nodes on the network making it way faster while still maintaining security because the chain isn’t being constrained by slower nodes. However, less decentralization means it is more vulnerable to being controlled by one or few entities, and also is subject to a single point of failure.
· Decentralized and scalable: A multichain ecosystem with a bunch of interoperable monolithic chains which gives you decentralization and scalability because each chain has less activity. Still, this method is less secure because hackers would only need to gain 51% control of one small chain to potentially leave the entire ecosystem vulnerable.
· Decentralized and secure: this is what the most popular blockchains – Bitcoin and Ethereum – currently optimize for. They have a ton of nodes on one chain making for a secure and decentralized network. However, this hurts scalability making the blockchain slow and expensive as it gets more activity.
The Next Generation Blockchain
The new post merge Ethereum won’t be just Proof of Stake (PoS) consensus, it will be a whole new network structure. This structure is a modular blockchain. A modular blockchain structure takes the three blockchain components and compartmentalizes them into essentially three layers.
1. Consensus Layer: The core layer of the blockchain which controls consensus and validator distribution.
2. Data Layer: Instead of housing all of the data on one chain, the data is spread among 64 shard chains to take the load off the main chain.
3. Execution Layer: Layer 2 rollups compress large bundles of transactions and deploy them to the shard chain, think of a .zip file.
As Ethereum scales and the number of validators on the network increase, the number of shard chains can also increase, allowing Ethereum to theoretically scale in perpetuity. This is likely the most innovative design in blockchain technology to date, and this shift is going to be a major move forward for the Ethereum ecosystem.