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Today was a monumental day for the crypto ecosystem as Ethereum (ETH) transitioned to proof-of-stake seamlessly a few hours ago. The complexity that surrounded the Merge upgrade was nothing short of a miracle because it was similar to changing the engine on a running car. For a long time, the ETH network has been riddled with scalability issues. With Merge, the stage is set for the transformation into a powerful infrastructure layer for rollups. Rollups, stated in simple terms, allows transactions to be processed faster by performing it on another separate chain.
In today’s article, we will give a brief overview of the next upgrade “Surge” for the new Ethereum network.
What the Merge does is combine the old execution layer of Ethereum with the new consensus engine provided by the Beacon Chain, swapping the current algorithm utilizing proof-of-work (PoW) miners with a coordinated network of proof-of-stake (PoS) validators. Moving forward, PoS validators will be responsible for verifying the transactions.
Ethereum will now implement the Proposal-Builder separation (PBS) for the consensus layer. PBS is a potential solution to blockchain censorship and maximum extractable value (MEV) attack problem. Let’s dive into this.
A block proposer is an entity which creates a block of transactions, and propagates it to the network for inclusion in the blockchain. A block proposer can choose to include or exclude transactions from a block, as they look at which transactions in the Ethereum mempool pay the highest priority fee.
In PBS, the proposer instead relies on a market of outside actors (the block builders) who produce bundles with complete block contents, and the fee for the proposer, with the proposer choosing the bundle with the highest fee. A block builder is an entity which creates a list of transactions and submits it, along with a bid, to the Ethereum network.
Traditionally (in PoW Ethereum), any node can be a block proposer. It means miners compete with other miners to be the block proposer. With the Ethereum Merge, where Ethereum will become Proof-of-Stake, validators are randomly selected to be block proposers in every slot. This validator creates the new block and sends it to other nodes in the network. At the same time, a committee of validators is randomly selected, who will vote to determine the validity of the proposed block.
The PBS design makes it easy to implement danksharding on top of it. Danksharding is a new sharding design, where one proposer chooses all transactions and data that goes into a slot. The proposer, who is randomly chosen, subsequently performs data availability sampling (instead of downloading the entire chain) on blockchain data. This ensures a decentralized way of maintaining data availability for light clients, which is not possible with single-validation due to the excessive data size of blocks post-merge.
Surge upgrade will unlock interesting capabilities for Zero Knowledge (ZK) rollups and is scheduled to occur later in 2023-24.
Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.