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Ethereum Faces ‘Blockchain Trilemma’ As ‘Merge’ Mania Cools

After much celebration over Ethereum’s successful transition, the question remains what’s next for the most commercially important crypto project.

After much celebration over Ethereum’s successful transition, the question remains what’s next for the most commercially important crypto project. The much-anticipated software overhaul, dubbed the Merge, shifted the blockchain from a so-called proof-of-work system to a more energy-efficient proof-of-stake method of securing the network. There were no changes related to network transaction fees or speed, which are common complaints among Ethereum users.

Completing the upgrade without any software downtime is a brilliant technical achievement, said Harsh Rajat, the Mumbai-based co-founder of Ethereum Push Notification Service or EPNS. “Similar to changing the foundation of a skyscraper while it’s still standing!”

Now developers will address an important existential question. The Merge was the first step towards a series of upgrades on Ethereum to solve the scalability dilemma. Over time, the theory suggests that a blockchain must compromise on one of three key aspects: scalability, decentralization, and security. And that a blockchain cannot have all three at once.

For Ethereum, the first step in solving this problem was moving to POS with the merger, and four more development phases follow.

  • The Surge: Implementing sharding, a scaling solution that lowers the cost of bundled transactions on Ethereum.
  • The Verge: Introducing ‘dum trees’, an update that will make the network more decentralized by making it easier for users to become validators.
  • The Purge: Eliminating Historical Data and Technical Debt.
  • The Splurge: Various updates after the first four phases to ensure smooth network operation.

“The ultimate goal of all these upgrades is to make Ethereum more scalable, faster and cheaper to use,” said Aditya Khanduri, head of marketing at Biconomy, a protocol that helps improve user onboarding and transactional experience on decentralized applications.

“It’s difficult to talk about the timelines of the next four phases, as all of them are still actively researched and developed. But in my opinion it will easily take 2-3 years for all phases to be completed,” said Sameep Singhania, co-creator of QuickSwap, a decentralized exchange built on Ethereum scaling solution Polygon.

According to Ethereum co-founder Vitalik Buterin, the network will eventually be able to process 100,000 transactions per second upon completion of these five phases.

In the meantime, more investors in Ether, the network’s native token, are expected to lock up their tokens in digital wallets that give their owners a return under the new proof of stake format. But they won’t be able to turn them off, at least not for a while.

Locked Ether plays a vital role on the upgraded network. Wallets with what is referred to as expanded Ether are used to order network transactions. Currently, about 11% of Ether is already locked up – either directly or through providers such as Lido, Coinbase Global Inc. and Kraken – in staking wallets on the Beacon Chain of Ethereum used to test the process, according to blockchain analytics firm Nansen.

Ethereum will have to undergo yet another software change called Shanghai, which is at least six months away, to allow withdrawals of the deployed Ether. Even then, the shots are maximized.

“After the merger, the Ether stuck in the strike contract would still not be available to withdraw,” said Kunal Goel, a research analyst at Messari.

Ethereum developers are also working on something called EIP 4844, or Proto DankSharding, which aims to minimize the high network transaction costs referred to by users as gas charges, Goel said.

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