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Sep 2022

Ethereum’s Proof-of-Stake is live: A note on the successful Merge

by Lucas Santana, Research Analyst
3 min read
Sep 15, 2022

Ethereum’s Proof-of-Stake is live: A note on the successful Merge

The Merge, Ethereum’s transition to Proof-of-Stake (PoS), was fully activated this morning. Ethereum’s consensus mechanism no longer relies on mining, and the network has become a lot more environmentally sustainable. Also, the monetary dynamics of its native token, ether (ETH), has just been updated, with its current issuance being roughly 10% what it used to be under Proof-of-Work (PoW), potentially making Ethereum the first profitable blockchain since crypto’s inception, a topic we will cover in a forthcoming article. 

As we noted in a short piece released last week, this important upgrade was scheduled to happen in two phases: (i) the Bellatrix upgrade, which was successfully activated on September 6, and (ii) the Paris upgrade, which was contingent on the Ethereum network’s hash rate. 

After much anticipation, the upgrade happened today, September 15, at 6:43 AM UTC, when the first block was produced by PoS validators at height 15,537,394. Under the new consensus mechanism, Ethereum blocks are scheduled to be created every 12 seconds (slightly faster than PoW’s ~13 seconds block interval), a period over which a validator is randomly selected by the network’s software to propose a new block of transactions. If a chosen validator is down when a slot is assigned to them, that slot will be empty and the corresponding block is not created. Post-merge, there were zero missed slots in the first staking epoch (which equals to 32 validation slots), showing the level of coordination and uptime in the new validation network. The first block after the activation of PoS reached its finality (block immutability) in 12.8 minutes (2 staking epochs), with a validator participation of 99.41% (in a set of ~427.000 validators), a good indication of the veracity of its information. The whole world has been monitoring the health of the Ethereum network and its decentralized applications, an effort that should continue in the coming days and weeks to assess how the blockchain will behave after switching its core engine.

We believe the successful Merge is a major milestone for Ethereum and crypto in general. The Merge has demonstrated the level of innovation and commitment of the teams working in the technologies that will enable blockchains to reach mass adoption in the coming years and decades. For investors in Ethereum’s vibrant ecosystem, whose core applications include decentralized finance and NFTs, this successful upgrade shows that the flagship smart contract platform is on track to continue providing the necessary infrastructure for developers to create innovative solutions to millions of users worldwide. Even with the speculation and corresponding volatility we’ve seen over the past few months regarding ETH, we are confident that this successful upgrade is a major indication of a positive future for Ethereum, which should be reflected in the value accrual on ETH over the long haul. We believe crypto is a long-term play, and today’s events are yet another demonstration of how far blockchain technology, and the people involved in it, have come in so little time. This is just the beginning, and there’s much more to come.

For a recap of Hashdex’s coverage on Ethereum and The Merge, please visit our Research Center

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About Author
Lucas Santana,
Research Analyst
© 2022 Hashdex Asset Management Ltd.
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