After (the Merge) merging ‘Eth1’ and ‘Eth2’ into a single chain, on September last year, Ethereum Blockchain changed its consensus mechanism to Prove of Stake PoS. Sharding plans have shifted to find the most optimal way to distribute the burden of storing compressed calldata from rollup contracts, allowing for exponential growth in network capacity. This would not be possible without first transitioning to proof-of-stake.
The next big update is in 12th April (in two days) called, Shanghai/Capella update (EIP-4895), that will let ETH validators unlock their staked ETH from the mainnet, so investors can finally withdraw over $31.5 billion worth of ETH (in time of writing) that started piling up from end of 2020. There are more than 17 million ETH that can be un-staked, which makes almost 15% of circulating supply by over 550,000 validators, following Ethereum Improvement Proposal-4895 (EIP-4895) i.e. Shanghai update. This means users that want liquidity do not have to rely upon liquid staking derivatives (LSDs) such as: Lido or RocketPool that can be a centralizing force on Ethereum. This happening can drawback the ethereum price, because some of the staked ethereums will be sold, but in same time it will raise the liquidity in the markets, which will take few weeks for all eth to be un-staked.
The main benefit for users, from Shanghai/Capella (aka Shapella) upgrade is the reduction of gas fees for layer2 solutions and projects that run on top of Ethereum mainnet.
After the Merge, Ethereum will have five more, core changes and these upgrades are:
- The Surge: upgrades related to scalability by rollups and data sharding on Ethereum mainnet.
- The Scourge: upgrades related to censorship resistance, decentralization and protocol risks from MEV.
- The Verge: upgrades related to verifying blocks more easily.
- The Purge: upgrades related to reducing the computational costs of running nodes and simplifying the protocol.
- The Splurge: other upgrades that don’t fit well into the previous categories.
The Surge is a term that is often used to describe the dramatic increase in the use and adoption of decentralized applications (dApps) on the Ethereum blockchain, which has led to various scalability issues. In order to address these issues, several upgrades related to scalability have been proposed, including rollups and data sharding. The Surge EIP-4844, aims to split the Ethereum chain into multiple shards to boost scalability, so that means faster and cheaper transactions in the mainnet and is expected to happen by the end of this year.
So, after “The merge”, Sharding will be the biggest update in the mainnet, that means it will splits validation work into smaller amounts and the network will handle more transactions, it means it will be more scalable and it could increase network participants by allowing people to run Ethereum on small devices, like phones or tablets.
Data sharding involves dividing the Ethereum network into smaller, more manageable pieces called shards. Each shard would be responsible for processing a subset of the network’s transactions, allowing for parallel processing and increased throughput. Data sharding is a more complex solution than rollups, as it requires significant changes to the Ethereum protocol and network architecture. Both rollups and data sharding are important upgrades related to scalability that are being developed and implemented to address the surge in demand for Ethereum-based dApps. These upgrades are expected to greatly increase the capacity and performance a.i. speed of the Ethereum network, allowing it to support a much larger user base and a wider range of use cases.
The Scourge is a term used to refer to the practice of frontrunning, which involves a trader or miner using their knowledge of pending transactions to place their own trades ahead of others in the transaction pool. This practice can lead to a range of negative outcomes, including censorship, centralization, and risks associated with protocol manipulation. To mitigate the scourge of frontrunning, several upgrades related to censorship resistance, decentralization, and protocol risks from MEV (Miner Extractable Value) have been proposed.
Censorship resistance upgrades focus on preventing malicious actors from selectively censoring transactions. This can be achieved by implementing decentralized transaction relayers, which allow users to broadcast their transactions through multiple channels simultaneously. This makes it much more difficult for a single actor to censor specific transactions, as they would need to censor all of the channels simultaneously.
Decentralization upgrades aim to reduce the power of centralized entities in the transaction validation process and to encourage the use of decentralized exchanges, which can reduce the need for centralized intermediaries in the transaction process.
Protocol risks from MEV can be mitigated by implementing various mechanisms that eliminate the ability of validators to manipulate transactions. One approach is to implement a time-locked protocol that prevents miners from altering transactions for a set period of time. Another approach is to implement a transaction privacy layer that makes it more difficult for miners to identify profitable transactions. Overall, these upgrades can help to reduce the scourge of frontrunning and create a more fair and equitable transaction environment for all participants. However, it is important to note that these upgrades are still in development and may have unintended consequences.
The Verge is an upgrade that is expected to drastically reduce Ethereum`s reliance on nodes as a store of history and data, this will introduce so-called “verkle trees“, “a powerful upgrade to Merkle proofs that allow for much smaller proof sizes will optimize storage on Ethereum and help reduce node size. Ultimately this will make Ethereum to become even more scalable and according to Vitalik Buterin, the verge will be great for decentralization of the network. Verkle trees are data structure that will be used to upgrade Ethereum nodes so that they can stop storing large amounts of state data without losing the ability to validate blocks.
The Purge will significantly reduce the amount of space required to store ETH on a hard drive and it will eliminate the use of nodes in storing Ethereum history, which was one terabyte of storage that wasn’t practical for a regular user to run a node. The purge will cut down the amount of space you have on hard drive, to simplify the Ethereum protocol over time, without requiring nodes to store history, which makes possible to run validator from any device including smartphones.
The final scheduled upgrade is the Splurge carries various important extras, ensuring the network runs smoothly following the previous four upgrades.
The roadmap is the current plan for upgrading Ethereum in future and is expected to change as new information and technology become available.