The Compromises and Benefits of Ethereum switching to a Proof-of-Stake network - Summarised

Before its launch in 2015, Ethereum developers already had a stated ambition to replace its Proof-of-Work (PoW) consensus mechanism with an alternative one: Proof-of-Stake (PoS). While it was deemed too technically risky to start the network with anything other than PoW, the eventual migration to PoS has been a major goal of Ethereum developers and a highly anticipated milestone on their roadmap.

The migration to PoS is considered to be an extremely important milestone because developers regard it as a key prerequisite for several subsequent development goals, and because the Ethereum community believes the reduction in energy usage (by over 99.5%) is worth the trade-offs in protocol attributes it generates.

Though subject to some changes, the development roadmap itself predates the launch of Ethereum and has existed since the network was only in its testnet phase. Many of the changes described in the evolving roadmap have already been implemented, but the migration to PoS, one of the most challenging and involved modifications, has yet to be completed, and is now delayed since 2017.

The reasons for the delays are many and complex, but they more or less reduce to PoS proving much more technically challenging to safely implement than developers first thought. Many prototypes have been proposed and evaluated, but problems have kept emerging, necessitating ongoing multi-year bouts of bug-fixes and redesigns.

We can even observe the serial delays of the migration, often referred to as the Merge, from blockchain data.

There have been tests and practice merges, most recently on 23 April 2022, conducted to ensure the mainnet transition proceeds safely. The Kiln testnet merged on 15 March 2022 and incorporated the last major specification changes. Although many of these tests have been successful, others have raised concerns and probably contributed to the latest delay of the Merge from H1 2022 to H2 2022.

A list of concrete tasks to be completed before the Merge can take place can be found here. While the list still includes a large number of unfinished tasks, many are also completed.

By implementing PoS and sharding, Ethereum trades off decentralisation, trust minimisation and censorship resistance. On top of that it will suffer from a much larger attack surface. In return it gets vastly increased on-chain data throughput (scalability), and drastically reduced energy consumption.

Whenever it happens, the Merge (probably this year) will represent a major shift in Ethereum design, capabilities and attributes. The Ethereum 2.0 moniker is therefore quite fitting — post the Merge Ethereum will be a completely different system. We look forward to this next phase of the Ethereum project and will keep our investors informed as the work progresses.

Read our full-length report here.