What ‘The Merge’ with Ethereum means for Blockchain Layer 2 Solutions

What 'The Merge' with Ethereum means for Blockchain Layer 2 Solutions

Ethereum is just over a week from officially moving to a proof-of-stake (PoS) blockchain with The Merger should end between 13 and 15 September. With this move, Ethereum will abandon its current proof-of-work (PoW) chain, removing miners from the ecosystem.

Ethereum is a huge ecosystem on which thousands of decentralized applications and decentralized financial protocols operate. In addition, there are several layer 2 solutions, ie solutions built on top of the blockchain itself, layer 1, to facilitate faster transactions and make Ethereum more scalable.

The Merger which would complete the second stage of the three-phase transition process. The upcoming event will only see the official consensus change, where the Ethereum blockchain would start processing transactions on the PoS chain. However, there won’t be much impact on scalability or gas charges.

The scalability fixes are expected to come after the completion of the third phase, which would introduce sarding, a form of parallel processing that Ethereum founders and developers claimed would exponentially increase Ethereum transaction throughput.

Will Layer 2 solutions like Polygon, Arbitrum One, Boba Network and Loopering be viable after the Merger? Cointelegraph has reached out to industry experts to find out how these Tier 2 ecosystems will play out The Merger.

Paolo Ardoino, CTO of Bitfinex, thinks so The Merger it won’t impact L2 because it won’t solve scalability issues right away. He told Cointelegraph that even after the third stage of the Ethereum transition is complete, when it becomes monumentally scalable, L2s will still find a place in the ecosystem. He explained:

“Regarding the L2s, the situation will not change. These solutions still hold key value for short-, medium- and long-term scalability. L2s will always be needed to meet the growing demand and use of blockchains worldwide. Even 100,000 transactions per second is not enough to meet real global demand and adoption.”

Anton Gulin, director of global trading at AAX Exchange, told Cointelegraph that L2s will not experience many problems or see the need for major technical changes, as the translation has been ongoing for two years, so L2 chains are already prepared.

“The most important point is success The Merger and if he can respond to the momentum. As more investments flow into the space, we can expect even better solutions, no matter what happens next. The Merger. The other L2s will adapt or cease to exist,” he explained.

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It is commonly wrongly thought that scaling Ethereum solutions would make L2 solutions redundant or useless, but the majority of L2 solutions like Polygon said that the consensus change for Ethereum will not actually reduce the need for these L2 scaling solutions. In an official blog post, the protocol said:

“While the merger paves the way for shaving, this future upgrade will not be enough to scale Ethereum. In fact, Polygon will benefit from it, and it will increase the performance of our scaling solution.”

An examination of the short-term and long-term role of L2s after the Merger

Many people wonder how the L2 ecosystem fits into the picture, since Ethereum relies on the Merge to build its infrastructure. L2 integration has boosted Ethereum’s performance for quite some time now. But experts say that The Merger it will not only improve the Ethereum ecosystem, but also make L2s more efficient.

Vlad Totia, research analyst at L1 blockchain platform Zilliqa, told Cointelegraph that L2 will improve alongside L1. He explains:

“Every L2 built to help Ethereum scale is evolving with Ethereum. This means that if we consider, for example, that Arbitrum is faster than Ethereum before The Merge and the L1 itself is getting faster, then Arbitrum is basically moving at the same speed. User and developer experience with L2s will improve along with how Ethereum improves over time.”

The Merger is also expected to make the L2s more environmentally friendly, with Polygon claiming to reduce their carbon emissions by 60,000 tonnes, or 99.91% of their current value.

The Merger will erase 60,000 tonnes of #Polygon’s carbon footprint. Ethereum’s transition to a PoS consensus will affect the entire ecosystem in many ways, but it will uniquely affect the carbon emissions profile of the Polygon network. [1/11] – Polygon – MATIC (@0xPolygon) September 7, 2022.

Experts believe that the environmental aspect of the transition to PoS could pave the way for better adoption by L2s. Pat White, CEO and co-founder of enterprise digital asset platform Bitwave, told Cointelegraph that the shift to proof-of-stake would be critical to legitimizing the Ethereum network and bringing more businesses to the blockchain. He said “a significant number of businesses have backed away from digital assets due to environmental concerns. The Merger could be a catalyst for companies to take this route”.

In addition to the efficiency and environmental benefits, the move is expected to strengthen network security against coordinated attacks. White explained that PoW blockchains are vulnerable to rearrangement attacks, “although it is much more difficult to produce similar attacks on a PoS blockchain because the attacker would have to burn two-thirds of the ETH supply. »

This reduction in ETH’s risk will open the floodgates for institutional capital because the network is more secure and more supportive of corporate environmental, social and governance goals, White said.

The Merger will mark the completion of the second phase of the three-phase process. A significant part of the scalability features, such as trimming and high transaction throughput, will be achieved after the completion of the third and final phase, scheduled for the end of 2023.

Daniel Nagy, chief scientist at decentralized storage and communication systems provider Swarm Foundation, sheds light on another aspect of it The Merger and its long-term impact on L2s. He told Cointelegraph that many projects, especially non-fungible token (NFT) projects, could choose L1s over L2s, when long-term scalable solutions were introduced.

He said rolling out more advanced L2 transaction systems will help a lot The Merger and it could also eat away at the current sidechain market share. Nagy added that roll-up, whether optimistic or zero knowledge, will benefit greatly from sharing, even in its most primitive form, where it is only useful for storing data with guaranteed availability.

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It won’t touch him right away either The Merger, but can be expected soon after. He explained that “roll-up is likely to catch on, although chaining can be expected to decline in popularity alongside roll-up and the more scalable L1 enabled by The Merge. »

Many industry insiders have reported that L2s will continue to thrive and gain traction on the Ethereum blockchain regardless of how the Scalable network becomes, predicting that although the Ethereum mainnet could see some traction after the completion of all phases, the L2s will be on. the execution layer.

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