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Blockchain, data analysis,Toto (blockchain advertising planning company) director of deep dry goods: panoramic analysis of Ethereum merger!

Time : 12/12/2021 Author : yu53lk Click : + -
        [toto blockchain advertising planning company: a brand studio focusing on blockchain project copywriting planning, graphic design, business model innovation and network marketing promotion!]. As the merger date approaches, Ethereum will undergo the most important and complex upgrade in history. In order to understand the reasons and possible impacts of Ethereum's merger, we need to first understand the positioning and future roadmap of Ethereum. Merger refers to the merger of the Ethereum execution layer (current main network) and the beacon chain (New POS layer). The entire Ethereum network will inherit the transaction status of the original main network, and the beacon chain will be merged as the consensus layer.
 
        It should be noted that after the merger and upgrading of the Ethereum main network, the POS conversion will not be completed immediately, but it will take a period of time to verify the security; The project will not be migrated to POS immediately. Ethereum will be in the "POS + pow" coexistence mode for a period of time, so it will not be priced in quickly. The surge phase is dedicated to solving the problems of traffic congestion and gas charges in Ethereum. This phase mainly refers to introducing sharding (sharding) into Ethereum, which is to divide the entire network of Ethereum into smaller partitions, so as to make the Ethereum network more expandable. It is reported that Ethereum will be cut into 64 pieces in the thesurge stage. In combination with layer2's rollups technology, theoretically, the upper limit of TPS may reach 100000 strokes / second (currently, Ethereum TPS is about 13 strokes / second).
 
        The verge stage is a technical update and a powerful upgrade of the Merkle proof. In this stage, Ethereum will introduce the verkle proof and transition the Merkle tree to the verkle tree. The technology upgrade at this stage will optimize the storage on Ethereum, and at the same time, reduce the size of nodes, thus helping Ethereum become more scalable. The purge stage is mainly to reduce the hard disk space required by subsequent verifiers by eliminating historical data and eliminating technical debt, so as to further simplify storage and reduce traffic congestion. This means that the hardware requirements of Ethereum on nodes will be reduced, and the network bandwidth will also be reduced.
 
        The spluge stage is equivalent to finishing work. Most of the upgrades in this stage are miscellaneous upgrades. The purpose is to simplify the use of Ethereum, make it more accessible to ordinary users, and ensure the smooth operation of Ethereum after the completion of the above stages. The key point of the merger is that the consensus mechanism of Ethereum has changed from POW to POS. POW is a workload proof mechanism. In simple terms, the miners' income depends on the amount of work they contribute to mining. The greater the computing power they have, the higher the income they get. POW is a distribution method of "more work, more money"; POS is literally translated as equity certificate, that is, it directly proves that the shares you hold determine your voting rights and earning rights, which is similar to using stocks to record equity certificates.
 
        Why does Ethereum switch from POW to POS? Vitalik, founder of Ethereum, once wrote an article explaining the reason for this:. You can rent GPU cheaply, so the cost of attacking the network is only to rent enough GPU capacity to exceed the cost of existing miners. For every $1 block reward, existing miners should spend nearly $1 (if they spend more, miners will exit because they are unprofitable, and if they spend less, new miners can join and get high profits). Therefore, attacking the network only costs more than $1 a day temporarily, and only takes a few hours. ASIC is a capital cost: once an ASIC is purchased, it can be expected to be used for about 2 years before it is worn out and / or eliminated by newer and better hardware.
 
        If a chain is attacked by 51%, the community may respond by changing the pow algorithm, and your ASIC will lose its value. On average, mining is about 1 / 3 of the ongoing cost and about 2 / 3 of the capital cost. Therefore, for every $1 reward per day, miners will spend about $0.33 per day for electricity + maintenance and about $0.67 per day for their ASIC. Assuming that the ASIC lasts for about 2 years, the miners need to spend 486.67 dollars on the ASIC hardware of this amount. In other words, ASIC provides this higher level of security protection at a high cost, because the threshold for joining becomes very high.
 
        The proof of equity is almost entirely the cost of capital (token deposited); The only operating cost is the cost of operating the node. Now, how much money are people willing to lock in to get $1 a day? Unlike ASIC, the deposited tokens will not depreciate. After the pledge is completed, your tokens will be retrieved after a short delay. Therefore, participants should be willing to pay higher capital costs for the same number of awards. It is assumed that a return of about 15% is sufficient to encourage people to pledge (i.e., the expected eth2 return). Then, a reward of $1 per day will attract a deposit return of 6.667 years, that is, $2433.
 
        The hardware and power costs of a node are very small; A computer worth $1000 can mortgage hundreds of thousands of dollars of deposits, and about $100 a month of electricity and the Internet are enough. But conservatively, we can say that these continuous costs account for about 10% of the total cost of stacking, so we only have a reward of $0.90 per day corresponding to the capital cost, so we really need to reduce the above figure by about 10%. However, in the case of POS, the situation is much better. For some types of 51% attacks (especially restoring the final block), there is a built-in "reduction" mechanism in the proof of equity consensus. Through this mechanism, most of the interests of the attacker (and the interests of others) can be automatically destroyed.
 
        For other attacks that are more difficult to detect (especially 51% of the alliance reviews other owners), the community can coordinate the soft fork (uasf) activated by a few users, in which the attacker's funds are again destroyed in large quantities (in Ethereum, this is accomplished through the "inactivity disclosure mechanism"). There is no need for a clear "hard fork to delete coins"; Except for the need to coordinate on the uasf to select a few blocks, everything else is automated and only needs to follow the implementation of the protocol rules. GPU based workload proves to be reasonably decentralized; It is not difficult to obtain a GPU. However, GPU based mining fails to a large extent in the "security defense attack" standard mentioned above.
 
        On the other hand, ASIC based mining requires millions of dollars to enter (if you buy ASIC from others, in most cases, the manufacturing company will get better transaction results). The ultimate goal of Ethereum merger is capacity expansion, which is achieved through sharding + rollup. In order to shard, the Ethereum network needs to be transformed into POS first, because POS and sharding are logically more consistent. POW considers the global, while POS and slicing use the element of "random number", which both pursue "minimum sufficiency and necessity" to reduce storage / verification redundancy. POW mining requires a large amount of power resources. According to the previous data of Cambridge University, the annual power consumption of bitcoin network is about 121.36 billion kwh, which exceeds the annual power consumption of Argentina, the Netherlands and the United Arab Emirates.
 
        Although the current power consumption of Ethereum is far lower than that of bitcoin, Ethereum, which is positioned as the world computer in the future, hopes to do better in environmental friendliness. It is expected that after the merger, the power consumption of the Ethereum network will be reduced by more than 99%. For comparison, about 149 kwh is consumed for 100000 visa transactions, compared with 0.667 kwh for 100000 transactions in the merged POS Ethereum network. Currently, the number of active nodes in Ethereum is at a high level, with about 9000 verification nodes (peak 12569). These nodes are distributed all over the world. From the number of verification nodes and geographical distribution, the degree of decentralization of eth is among the best in all public chains.
 
        However, when Ethereum switches to POS, there will be more authentication nodes. At present, there are more than 410000 beacon chain verifiers (clients pledging 32eth). Since the merger of Ethereum will greatly reduce the access threshold of verifiers (32eth), users can also participate in the pledge with very small funds through the pledge service provider, and further avoid the trouble of machine configuration and operation and maintenance, which will make the participation groups supported by Ethereum more extensive. Although the cost of block production will be reduced after the merger, it has little impact on TPS and handling fees. The reason is that the block size and the block output speed are basically unchanged. It is necessary to complete the thesurge slicing stage before the scalability of Ethereum can be greatly increased and the gas cost can be reduced.
 
        TPS (number of transactions per second) = the number of transactions that can be accommodated by each block / block out time. The merged execution layer does not change, so the space size of a single block is unchanged, and the block out speed is also maintained at about 13 seconds / block. Therefore, TPS will not change after the merger. After the implementation of eip-1559 last year, Ethereum's handling fee pricing mechanism has undergone major changes. It is divided into two parts: basefee and tips. The basic cost is determined according to the supply-demand relationship. The demand is the transaction request submitted by the user, and the supply is the computing space that Ethereum can provide. If the transaction request received by this block is greater than the request actually processed by the previous block, the basic cost of the next block will increase by 12.5% at most.
 
        Tipping is a reward for miners. It is also a bidding mechanism to attract miners, which is also determined by demand. After switching to POS, there is no change in the supply-demand relationship, so the handling fee will not change significantly. At present, under the pow mechanism, the average output is 2.08 eth every 13.3 seconds, and the annual block award is about 4.93 million eth. After the merger, the block award will be cancelled; At present, a total of about 13 million eth is pledged, and about 584000 eth is released as pledge rewards in a year. After the merger, the pledge rewards will be distributed to the verification nodes on the beacon chain. Therefore, the current output / total of eth = (493 + 58.4) / 11970 = 4.6%; After the merger, this data will become 58.4/11970 = 0.5%, down 89%.
 
        In terms of destruction, since the implementation of eip-1559 on September 27, 2021, 2.55 million eth have been destroyed, which is far more than 584000. Therefore, the ETH will realize deflation after the merger, with the deflation rate = (255-58.4) / 11970 = 1.6%; Of course, the calculation here does not take into account the changes in the total amount of pledge and the reduction of the gas fee after the completion of the future segmentation. ultrasound. Money also predicted the change of eth supply after the merger:. Heath tarbert, chairman of the US Commodity Futures Trading Commission (CFTC), hinted at the investment conference held by coindesk in New York that on the blockchain with proof of interest (POS) as the consensus mechanism, those tokens used as collateral will likely be regarded as securities.
 
        After the merger, Ethereum will be converted into POS, which may be regarded as securities. That is, the regulatory authority will conduct compliance review on it and decide whether it will stay or not. Stake. Fish also analyzed in the 2021 pledge ecosystem report that "since the pledge looks like fixed income in a certain sense, it may cause the regulator to think that the verifier is closer to the financial entity than the miners. If this happens, the verifier will not be able to maintain compliance". After the merger, the pow mechanism will be abandoned, the Ethereum miners will no longer receive mining rewards, and the high-priced machines in their hands will become scrap iron. The miners are all profit seeking, so they will probably not sit idly by and will probably continue to support the ETH chain of pow, which will lead to bifurcation.
 
        Vitalik has also expressed the view before: theoretically, as long as there are miners to continue, the Ethereum 1.0 chain will not be affected to continue to operate. The income of miners depends on the utilization rate of the network. At present, more than 90% of Ethereum service fees are generated by the defi protocol and NFT activities. Therefore, the protocols that occupy a large number of tvls and the selection of stable coin project parties are very important. From the perspective of community sentiment, there is no doubt that other than miners support eth merger. After all, although Ethereum is completely decentralized, vitalik, as the founder, is able to convince the public both in his contribution to Ethereum and in his thinking. His appeal to Ethereum community is very high.
 
        At present, most of the protocols will support the merger of Ethereum. The advantages of Ethereum merger are obvious: it will be more secure, decentralized, environment-friendly, from inflation to micro deflation, and it will also be more consistent with the future thesurge partition, which will pave the way for Ethereum to greatly improve its performance and realize large-scale applications in the future. Ethereum's positioning is to become the world's computer, which will carry more than 100 times of applications in the future. In order to achieve this goal, it is imperative to merge. As the official website of Ethereum says: imagine that Ethereum is a spaceship that is not ready for interstellar navigation. The community built a new engine and a solid shell through the beacon chain.
 
        At that time, the current spacecraft will be docked with this new system and combined into a spacecraft, which is poised for the distant future and the universe. Toto blockchain advertising planning company: a brand studio focusing on blockchain project copy planning, graphic design, business model innovation and network marketing promotion!.
 
        
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