The Future of Ethereum — The Merge, Surge, Verge, Purge and Splurge.

The Merge

The main purpose of The Merge is to transition Ethereum from a Proof-of-work (PoW) to Proof-of-stake (PoS) model. The PoS will require validators of the blockchain to stake ETH in order to validate the network. The biggest impact of the transition will be the drop in energy usage by 99,95%, as the network will no longer require powerful mining hardware. The transition might also have an impact on the pricing of gaming graphics cards which are used for mining Ethereum and other PoW chains. Secondly, ETH issuance is declining from 15k/day to 1.5k/day. This represents a 90% cut in emissions. The decline in emissions is seen as very positive by the community, as currently, ETH’s issuance is causing a +3.2% yearly inflation. The Merge will also provide 5–15% APR on staked ETH (as transaction fees will go to stakers). One of the many misconceptions about The Merge is regarding the lowering of transaction fees: The Merge will NOT lower transaction fees. Layer 2s (L2s) and EIP-4844 (also known as Danksharding) are the current short-term solutions to improve transaction costs (included in an update after The Merge). The transition to PoS happens in two steps. The Ethereum developers launched the Beacon Chain in 2020, which introduced staking (the first step). The plan is to swap the current PoW with PoS that the Beacon Chain (second step).

Figure 1: The Merge
  • It makes Ethereum ESG compliant
  • Will reduce the energy consumption by 99.95%
  • Will reduce ETH issuance (less inflation)
  • In theory, should make participation in the consensus easier

The Surge

The Surge focuses mainly on Sharding. Sharding is a multi-phase upgrade to improve Ethereum’s scalability and capacity, providing secure distribution of data storage. The upgrade will help spread the load of data management and storage. The Surge will also increase the network scalability of the base layer. To help with the scaling of L2s, Ethereum proposes EIP-4844 (Danksharding). Danksharding is an iteration of the Sharding mechanism of Ethereum. Sharding is a way for Ethereum to pass more data through the network. This will create a cheaper solution for L2s to post data on the Ethereum main chain. As of today (10/08/2022), Ethereum is able to process 16 transactions per second, and after The Surge it is expected to process up to 100k t/s (including all rollups).

Figure 2: The Surge

The Verge

The Verge will introduce Verkle trees. A Verkle tree is a commitment scheme that works similar to a Merkle tree but has much smaller witnesses. This would mean optimized storage and reducing the node size. The Verge will open the possibility for stateless clients where users will be able to validate and verify blocks without the need to store the whole blockchain history on a disk. It is a great step towards higher decentralization of the protocol.

Figure 3: The Verge

The Purge

The Perge will introduce state expiry. Ethereum clients will be required to discard data older than a year after The Purge. The main challenge after discarding the data is the storage of old data. It is still unclear how the developers will implement the mechanism of storing legacy data. The Purge improves Ethereum in a number of ways:

  • Reduces hardware requirements for nodes (less storage)
  • Allows clients to remove code that deals exclusively with legacy transactions
  • Reduces bandwidth on the network — clients need to sync less data
Figure 4: The Purge

The Splurge

The Splurge is the final phase of the Ethereum upgrade roadmap. It includes everything that could not be fitted to the previous updates. There is not much information on how and when this will be implemented. Vitalik Buterin even mentioned that if Ethereum scales enough with the earlier updates, The Splurge might not be needed.

Figure 5: The Splurge

The classification of Ethereum (ETH) according to the ITC:

The classification of the Ethereum token according to the ITC
Figure 6: The ETH Tokenbase entry (Source: https://itin.itsa.global/979KJJQ27)

The International Token Standardization Association (ITSA) e.V.

The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.

  • The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
  • The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to the market capitalization of classified tokens.
  • ITSA’s Tokenbase currently holds data on over 4000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.

Remarks

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International Token Standardization Association

International Token Standardization Association

The International Token Standardization Association (ITSA) is a not for profit organization working on holistic market standards for the global token economy.