The Ethereum Merge is here. What’s next?

After the Mainnet (1) and beacon chains merged, the Ethereum blockchain completed its transition from proof-of-work to proof-of-stake consensus. The network easily transitioned to PoS on September 15 when validators staking Ether ETH replaced hardware-based miners with processing transactions, add new blocks, and maintain the network.

As for the "endgame" for Ethereum's development, co-founder Vitalik Buterin laid out a five-step gradual path for introducing smart contract blockchain to the market. The network must execute thousands of transactions per second while being sufficiently trustworthy and censorship-resistant, as well as having a high block frequency and size.

The Merge was the first phase of a five-part process described by several Ethereum developers, ecosystem members, and analysts. The significant shift was the drastic reduction in power consumption that cut Ethereum's energy use by 99%. Just hours before the merge, Ethereum researcher Justin Drake predicted that the event would cut the world's electricity consumption by 0.2%. Buterin agreed.

The second significant adjustment involved a tweak in the PoS system, which lowered the amount of ETH issued by rewarding validators for their work maintaining the network and turned ETH into a deflationary asset. The implementation of sharding by Ethereum as a crucial step toward enhancing the scalability of the blockchain's data storage and access capacity is scheduled for 2023.

According to the Ethereum Foundation (2), sharding is the practice of horizontally dividing a database to distribute the burden throughout the network. Ethereum will leverage sharding in conjunction with layer-2 rollups by distributing the enormous quantity of data across the network. This is also intended to increase transactions per second and decrease network congestion.

This decentralized alternative to building a larger database, eliminating the need for validators, and storing all of the network's data, which would require expensive hardware; additionally, this implies that an ordinary user might run an Ethereum node or client on their devices, including PCs and mobile devices, strengthening the network through increasing decentralization.

Following the Merge, Ethereum's final three development steps are scheduled to occur over the next few years. Buterin (3) described The Verge as the third component of Ethereum's ongoing roadmap that Buterin described without getting too technical because this stage entails the deployment of Verkle trees (4) that will optimize data storage and node size.

The primary benefit that Verkle trees offer is that they are far more efficient in terms of proof size. Verkle trees perform a similar purpose as Merkle trees (5), which add up all transactions in a block and produce proof of the complete data set for a user seeking to confirm its authenticity. Despite the slightly more complex cryptography, the proof's smaller data size is sufficient to make stateless clients work.

Purging redundant data will ultimately minimize the amount of data needed to be stored by a validator, allowing the network to handle about 100,000 transactions per second while also attempting to relieve network congestion. While it's a frequent misconception that these stakeholders may retract their staked ETH once the merge is finished, for them to validate the Ethereum blockchain fully, they must commit 32 ETH.

Validators will only be able to withdraw their staked ETH after the Shanghai upgrade (6), which is scheduled to occur in the next 12 months. During this time, validators will also get fees for processing transactions deposited to their non-staking validator accounts.