Passing the latest in a series of critical tests ahead of The Merge, Ethereum completed the tenth mainnet shadow fork on July 27.
The result: It went off without a hitch.
In the last month, devs have executed three shadow forks and one testnet chain-merge. Shadow forks are trial runs of changes that are designed to be implemented on the live Ethereum blockchain.
DeFi investors and users are watching their progress closely to see whether the next iteration of Ethereum will commence this year and deliver huge efficiencies and faster transaction processing speeds.
Moreover, the Eth2 beacon chain went live on the Goerli testnet last week in preparation for The Merge’s final dress-rehearsal before it hits the mainnet in mid-September.
Anticipation for The Merge has lit a fire under Ether — the token has soared 36% in the last 30 days, three times better than Bitcoin’s 10% jump. Ether is trading at $1,612 in mid-morning trading U.K. time, an 11% uptick in the last 24 hours, according to CoinGecko data.
The Merge will unify the ‘Eth2’ Proof of Stake consensus layer, the Beacon Chain, with Ethereum’s existing execution layer, the Proof of Work mainnet. The move will trade miners for Proof of Stake validators, driving in a 90% drop in new ETH issuance and a more than 99% reduction in the electricity consumption of the network.
The upgrade is the largest in Ethereum’s history, with pundits likening it to changing the engine of an airplane mid-flight. As such, Ethereum’s core devs outlined a rigorous testing roadmap before the upgrade goes live on mainnet.
The Merge must first undergo 20 shadow forks and three public testnet deployments. Shadow forks — private testnet deployments of The Merge — are designed to trial each combination of Ethereum’s four execution layer clients and five consensus layer clients under Proof of Stake consensus.
Paritosh, a devops engineer at the Ethereum Foundation, posted on Discord that no issues relating to the clients or other major bugs were identified.
The chain-merge has now been successfully deployed via 10 shadow forks and two testnet deployments, launching on the Ropsten testnet in June and the Sepolia testnet in July. Its final testnet dress rehearsal is also expected to go live on the Goerli testnet between August 9 and August 11.
Ethereum’s devs are targeting for as few changes as possible to be made between the Goerli testnet deployment and the mainnet merge. In a recent appearance on The Defiant Podcast, Justin Drake, a researcher at the Ethereum Foundation, said Ethereum’s developers are hoping for Goerli to be The Merge’s “final big rehearsal.”
“We’re hoping for the client’s codebase to be at that point frozen so that the difference between the Goerli codebase and the mainnet codebase is as little as possible so that we reduce risk,” he said.
Paritosh told CoinDesk that the tenth shadow fork tested client releases expected to closely resemble those that will be used for the Goerli merge.
Much of the excitement for The Merge centers around its promise to transform Ether into ‘ultrasound money’. The term, which pokes fun at the mantra of ‘sound money’ associated with Bitcoin and gold maximalists, refers to the expectation that Ethereum’s issuance will become deflationary under Proof of Stake — meaning that more ETH will be destroyed through the burning of base fees than is newly created through rewards to validators.
Ultra Sound Money, a website tracking Ethereum’s burn rate, tweeted on July 18 that the sum of Ether burned had consistently remained above ETH’s expected post-merge issuance for 50 straight weeks since the burn was introduced with EIP-1559 in August 2021, according to a seven-day rolling average.
But Ether’s burn rate has plummeted since peaking at more than 12 ETH every minute as the NFT bubble burst and the broader crypto bull season came to a close, driving a dramatic drop in on-chain activity.
Ethereum’s burn rate is currently sitting at a weekly average of just 1 ETH per minute, according to Ultra Sound Money, a more than 91% drop. Average gas prices are at just 7 gwei as of this writing.
Speaking during a July 21 conference, Vitalik Buterin, Ethereum’s co-founder and chief scientist, said that new Ether will be issued annually at a rate equal to 166 times the square root of the sum of staked ETH. This means that if 1M ETH is staked, 166,000 new Ether will enter into circulation each year, but if 100M ETH is staked, issuance will only be increased to 1.66M Ether.
Drake told The Defiant he expects 1,600 ETH to be issued daily or 11,200 Ether weekly after The Merge. If his calculation is correct and network activity remains flat, Ether’s supply may continue to grow after Proof of Stake is activated.
While low gas prices may be challenging Ethereum’s deflationary value proposition, reduced transaction fees could also make it easier for new users to join the network.
The gas fees problem has been a major challenge for Ethereum in the last year. With anticipation building for The Merge and a solution to this issue, users are now measuring what the effects might be on their communities.
Low Gas Fees
Abhishek Anand, the business head of India-based gaming guild, IndiGG, told The Defiant that low gas fees have made it easier for users in emerging economies to begin exploring Ethereum.
“Low gas fees have been a great indication for the IndIGG community to ramp up onboarding users for them [to] get exposure to the broader web3 ecosystem other than just getting access to games,” Anand said. “IndiGG has onramped tens of thousands of users in the last six months to Web3.
Anand added that low transaction fees have allowed new community members to experiment with other projects on Ethereum.
Not everyone believes low gas fees are helping to onboard new users though. Speaking to The Defiant, Luis Buenaventura, a country manager at gaming guild, YGG Pilipinas, said that “the gas-sensitive part of the community has already found a home in Solana or BSC, or L2s such as Polygon and Ronin.”
“A lot of new entrants to blockchain have been kept out of Ethereum due to high gas fees in the past, but I don’t think the current gas fee situation has been low for long enough yet to make a difference,” he added.
Nico Odulio, the CTO of the gaming-focussed NFT studio, BreederDAO, told The Defiant that “the main barrier for entry to [web3] games is less about gas fees and more about the upfront cost of the NFTs needed to play.”
On Twitter, Evan Van Ness posted that low gas fees create an opportunity for users to carry out transactions that previously may have been prohibitively expensive, such as offloading small token balances, claiming airdrops, executing contract approvals, and migrating assets onto Layer 2.