How to Watch the Merge, Ethereum’s Biggest Upgrade Ever
The biggest upgrade in Ethereum’s history is just around the corner. Estimated to activate some time around September 13, 2022, the upgrade called the Merge will fuse together Ethereum’s current proof-of-work (PoW) blockchain with Ethereum’s proof-of-stake (PoS) blockchain, also known as the Ethereum Beacon Chain. As a result of the Merge, Ethereum will stop relying on miners for block production and instead rely exclusively on staking pools and independent validator node operators. This will drastically reduce the energy consumption of the world’s second largest blockchain by market capitalization. The Merge will also shrink the network’s security budget, the amount of ETH issued on Ethereum to incentivize the work of both miners and validators. This will cause annualized new issuance of ETH to decline from roughly 5% to below 0.5%.
The expected impacts of the Merge on energy consumption and total issuance are not the only reasons why the Merge is considered Ethereum’s biggest upgrade yet. The Merge is also Ethereum’s riskiest and most complex backwards incompatible upgrade, also called a hard fork. Ethereum core developers have been discussing this hard fork since as early as 2015 when Ethereum first launched. No public blockchain of Ethereum’s size has ever attempted to switch from a PoW to PoS consensus protocol and do so without sacrificing network liveness. The Merge is designed to minimally impact the user experience such that most decentralized applications (dapps) and users on Ethereum will not have to change anything about the way they interact with the protocol before or after the upgrade. Node operators, on the other hand, are required to configure software in new ways when connecting to Ethereum. In preparation for the Merge, node operators must operate two pieces of software, also called clients, and configure these two clients to communicate in tandem with each other.
(For more information about the execution risks of the Merge for node operators and a complete breakdown of the impacts of the Merge, check out Galaxy Research’s complete compendium of Merge-related content here.)
Ethereum’s switch to a fully PoS consensus protocol is the most anticipated event in the crypto industry of 2022, both because of the expected impacts of the Merge on Ethereum and the unprecedented complexity of the upgrade. As such, Ethereum stakeholders and crypto enthusiasts alike will be heavily monitoring and watching the Merge upgrade as it unfolds over the next two weeks. In preparation for the big day, this report dives into the different ways in which the public can track the Merge in real-time. We highlight how the public can monitor for key events surrounding the Merge such as a potential chain split and the creation of a new Ethereum forked asset (“ETHW”).
Timing
The exact time at which the Merge activates on Ethereum is unknown. Unlike all prior upgrades on the network, the Merge activates once a total terminal diffficulty (TTD) threshold is met, rather than at a specific block height. As background, TTD is the accumulated mining difficulty of all Ethereum blocks. Mining difficulty is a metric that helps regulate block times to range between 12 to 14 seconds no matter how much hashrate is being expended by miners. Adjustments to mining difficulty occur every block on Ethereum (while they occur every 2016 blocks on Bitcoin, or approxiamtely every 2 weeks). The more hashrate is expended, the higher mining difficulty becomes and the quicker the network will reach its TTD threshold of 5.875^1022. A sudden decline in hashrate would have the opposite effect, causing mining difficulty to adjust downwards, TTD to rise by smaller increments, and the Merge activation to happen later. Given that fluctuations in hashrate occur frequently on Ethereum, it is difficult to estimate the exact timing of this upgrade.
There are, however, helpful websites that are actively measuring mining difficulty and estimating weeks into the future when the TTD threshold will be reached. It’s important to note that the estimations can differ by several hours depending on how the site is updating their hashrate projections. For example, between wenmerge.com and bordel.wtf, timing estimations for the Merge have differed by over 40 hours.
Despite the differences in methodologies, it is difficult to argue that one hashrate projection is more accurate than another given that hashrate is fundamentally a very difficult metric to predict. This is why the activation of the difficulty bomb on Ethereum, which is also influenced by hashrate, has historically caught Etheruem core developers off guard on multiple occasions. To best estimate Merge timing, it is recommended that viewers follow more than one website, as each of these websites should converge on more accurate estimations for Merge activation as the TTD threshold inches closer to being reached. Several websites that track Merge timing include:
Network Health & Activity
Once the Merge does activate, the upgrade could be completed in as short a timeframe as 13 minutes. The key is to watch for network finalization, which is when we will consider the Merge upgrade successfully completed. Network finality on the Ethereum Beacon Chain is reached after 2 epochs are confirmed by at least 2/3 of active validators. An epoch is a period of time, 6.4 minutes, divided into 12 second intervals. Each 12 second interval is called a slot and in every slot a single validator is randomly chosen to propose a block. Missed slots suggest validators are not proposing blocks, which can be for a host of reasons, the most common of which is due to a client misconfiguration. Other validators that are not chosen to propose a block will be selected to offer up attestations, essentially offering a concurrence that the proposed block adheres to network rules. Attestations of blocks and epochs is the most common responsibility of active validators. If an epoch fails to meet the 2/3 threshold for validator attestations that epoch is considered unjustified and network finalization becomes delayed.
Once the chain finalizes as a PoS network, reverting all the blocks and transactions up to that finalization point becomes exceedingly improbable. 1/3 of all active validators would have to get slashed in order to revert or change the state of Ethereum chain history past a finalization checkpoint. Thus, finalization is a key milestone for Ethereum to reach as PoS network once the Merge is activated that gives confidence to users, exchanges, dapps, and other network stakeholders that the upgrade and the blocks processed since the upgrade are here to stay permanently.
As an aside, finalization under a PoW consensus protocol is not defined as clearly as it is under PoS. The blocks and transactions processed on a PoW blockchain become progressively harder to revert the more blocks are appended to the chain but it is up to the discretion of network stakeholders to determine at what threshold (after how many blocks) they consider transactions irreversible. In this sense, finality is probablistic in PoW. But in PoS, the definition of transaction finalization is not ambiguous and there are slashing penalties embedded into the code that dissuade validators from reverting transactions that are considered finalized by the protocol. In addition, there are penalties for active validators if the network is unable to reach finalization over a specific period of time (on Ethereum, four epochs).
Assuming all active validators on the Beacon Chain successfully configure their clients for the Merge, the time it takes for 2 epochs to become justified and the network to be considered finalized is 12.8 minutes. A live view of recent epochs and slots can be seen from Ethereum Beacon Chain block explorers such as beaconcha.in and beaconscan.com. The following is a snapshot of the slot visualization page on the beaconcha.in website. On this page, you can see the epoch number, epoch status, which is whether the epoch is considered justified or finalized, and slot status, which is whether a block was proposed, missed, or orphaned during that slot.
For a more granular inspection of epoch progression post-Merge, it’s useful to also monitor other pages on block explorers such as the Epochs page. This page lists in descending chronological order the time at which an epoch started, the number of attestations it has received, its status, and the percentage of validator stake that participated in voting on the epoch. This last metric is particularly useful in getting a sense of the overall health of Ethereum as a PoS network. A high participation rate from validators suggests that there is a strong probability epochs will be finalized without delay. A low participation rate, below the 2/3 threshold, suggests the opposite that network finalization has a high likelihood of being delayed. The following is a snapshot of the epoch page of beaconscan.com:
Aside from block explorers, one other alternative for the public to monitor the activity of Ethereum post-Merge is by running an independent node. This requires more technical know-how than simply reading a block explorer, though it is a more dependable option than receiving data from a third-party website. Running a node connects a user directly to the Ethereum blockchain and has the added benefit of contributing to the network’s decentralization. As mentioned, setting up a node for the Merge requires configuring two Ethereum software clients. There are several resources to help users set-up a node for the Merge. For a complete step-by-step guide to operating an Ethereum node, check out this Ethereum Foundation website and this CoinCashew website.
Once the set-up is complete, the node will log basic information about what it is seeing on Ethereum during the Merge such as the blocks it is receiving and its peer nodes. In addition, the node can be queried for additional information about network activity through API calls and RPC commands. For a complete list of the Beacon Chain Consensus Layer API calls, click here. For a complete list of the RPC calls available for the Ethereum Execution Layer, click here.
Chain Split Events
Once the TTD threshold is reached and the Merge is activated, there is the possibility of a chain split occuring on Ethereum because of the efforts of miners to progress a version of Ethereum that stays on PoW instead of upgrading to a PoS consenus mechanism. A group of miners and developers who are advocating for this outcome call themselves EthereumPoW (ETHW) and have already released dedicated client software for miners to run in order to continue mining a PoW version of Ethereum post-Merge. The ETHW client makes a number of changes to Ethereum including:
Redirecting burnt transaction fees from EIP-1559 to a new developer fund. (For more about EIP-1559, read this primer from Galaxy Research).
Disables the Difficulty Bomb. (For more about the Difficulty Bomb, read this primer from EthHub).
Adjusts the starting mining difficulty of the network.
Introducing a new chain ID, which is meant to prevent replay attacks between the EthereumPoW and Ethereum chains post-Merge. (For more about replay attacks, read this primer from Certik).
Two important metrics to watch as it relates to monitoring the ETHW network, but also any other PoW versions of Ethereum that get created after the Merge, are total hashrate and block difficulty. These metrics will illustrate how much miner support there is for an Ethereum PoW chain in comparison to Ethereum Classic (ETC), which is a pre-existing version of Ethereum that has been live since 2016. Extremely low hashrate and difficulty values will also suggest that the ETHW network is highly susceptible to 51% attacks and chain reorganizations. Under PoW mining, hashrate determines which miners have the highest probability of proposing blocks, processing transactions, and determining network finality. The lower the total hashrate of a PoW network, the easier it is for a potential bad actor to accumulate or deliver enough hashrate to meaningfully overtake and control block production on the chain.
The best way to track the ETHW chain is by running an independent Ethereum ETHW node. Similarly, the best way to track other chain splits that occur on Ethereum post-Merge is by running an older version of the Ethereum Geth client which has not been updated for Merge compatibility. This allows you to see if any miners continue to mine a version of the network that has not upgraded to the Merge or to the ETHW chain. For similar reasoning as explained above, running your own client sotware is the most reliable way to have a real-time view into network activity. Both the ETHW node and an outdated Geth client version will be able to support remote procedure calls (RPC) that can return information such as block hash, network gas price, and a true or false answer to the question of whether new blocks are actively being mined on the chain. The full list of RPC commands accessible through these nodes are available here. A few RPC commands that are particularly useful to note for node operators running an Ethereum proof-of-work client include:
Eth_getblockbynumber: Returns information about a block-by-block number.
Eth_mining: Returns true if client is actively mining new blocks.
Eth_getwork: Returns the hash of the current block, the seedHash, and the boundary condition to be met ("target").
Eth_syncing: Returns an object with data about the sync status or false.
Eth_protocolversion: Returns the current Ethereum protocol version.
Eth_gasPrice: Returns the current price per gas in wei.
For non tech savvy individuals, there may be a dedicated block explorer that is created by the ETHW team for their Ethereum PoW chain. The launch of the ETHW testnet came with a testnet block explorer that did share basic information about testnet activity such as average block times, total number of transactions processed, total number of blocks processed, and number of wallet addresses. At this time, there is not a dedicated block explorer for the ETHW chain, given that it has not yet launched. However, if and when it is created, it will likely be communicated from the ETHW Twitter page. And it is likely that a new block explorer will be created similar to the testnet block explorer showing mainnet statistics.
In addition, forkmon.ethdevops.io is an Etheruem fork monitoring website that has been used in the past during prior network upgrades to monitor chain splits on Ethereum. The website is currently inactive but Ethereum developers are planning on having the website running again for the Merge. Versions of this website have already been spun up for tracking the Merge on Ethereum testnets and shadow forks. An example of the fork monitoring tool, which was created for tracking the 12th mainnet shadow fork, can be found here. On this website, you can see the different client versions being run on mainnet shadow fork 12 and most importantly, evidence of a single canonical chain that all client versions have successfully connected to. Evidence of a chain split would result in two rows being depicted under the “Chains” section of the fork monitoring website. The following is a snapshot of the forkmon tool:
Event Commentary
Last but certainly not least, the public can track the Merge by following commentators and Ethereum core developers on social media. There will be thousands of people watching this upgrade around the world and sharing their thoughts on the event as it happens across several channels but especially the ones where the crypto community is already prolific like Twitter, Reddit, and Discord. The official Discord channel in which Ethereum core developers communicate about the Merge and other related topics is here.
In addition, the following are a handful of Ethereum-focused Reddit communities where there is an active following:
For tracking Merge commentary on Twitter, here is a Twitter list compiling the accounts of several Ethereum core developers that are worth following to get updates about the Merge as it happens. There is also a YouTube livestream of the Merge organized by the Ethereum Foundation, Bankless, The Daily Gwei, and EthStaker. The Nethermind client team has also announced that they will be hosting a livestreamed, 24 hour watch party for the Merge.
Post-Merge Analysis
Once the Merge is complete and Ethereum has finalized as a PoS chain, there are several ways to continue monitoring the network for changes that go beyond simply watching for network liveness and stability. For example, data around total ETH issuance and inflation post-Merge will be crucial for evaluating one of the key impacts of Etheruem’s transition to PoS. In addition, data on validator rewards including priority fees and maximal extractable value (MEV) will be important to analyze in the days, weeks, and months following the Merge in order to assess the new revenue model and profitability of validators on Ethereum.
For the most part, the same websites and tools that can be used for analyzing on-chain data and conducting a fundamental analysis of Ethereum today will still be relevant and useful for analyzing Ethereum post-Merge. On-chain data providers such as Coin Metrics have announced that many of the metrics they currently offer for Ethereum will continue to be offered and accessible to clients after the Merge. Coin Metrics specifically will also be extending their coverage of Ethereum by adding new metrics that track on-chain data from the Consensus Layer of Ethereum, though these metrics such as percentage of ETH supply staked and number of active validators will not be ready until sometime in Q4 2022.
A handful of other data providers that offer general on-chain metrics and aggregated historical data about Ethereum include:
For analysis specifically on the issuance rate of Ethereum post-Merge specifically, check out ultrasound.money. For analysis on MEV extraction, there are not many public monitoring tools that will be immediately available post-Merge. Ethereum core developers are currently working on a monitoring tool specifically for MEV relays, which are the operators that will connect third-party block builders to validators. For a look at the early specifications around such a tool, click here. Flashbots is also working on tooling and dashboards to improve the transparency of MEV activity on Ethereum. For more information about their data products, click here. Finally, two data providers that focus exclusively on offering data and analysis about MEV are EigenPhi and zeromev.org.
Conclusion
The biggest event in crypto of 2022 is happening next week. There are myriad ways to track the upgrade, some of which require a technical background and others of which simply require a basic knowledge of how to use social media. Whether you are new to crypto, an OG, or somewhere in between, the Merge is an event everyone can watch. The key is knowing when to watch the Merge and what to watch for when the Merge happens. The former mainly requires monitoring a handful of websites that track Ethereum’s hashrate and total mining difficulty. The latter requires an understanding of network finalization under PoS and the conditions under which this state is reached. Once network finalization is reached, a deeper and more thorough evaluation of Merge impacts on Ethereum can be done through the use of blockchain data providers. Given the unprecedented scope and complexity of this upgrade, it is likely that analysis of the short-term and long-term impacts of the Merge will continue to engage the crypto audience for many years to come. And, as always, we will be covering the Merge actively at Galaxy Research, with regular updates to our page at research.galaxy.com/merge.
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