SSV Network has an ongoing series of talks with industry leaders, leading up to the Ethereum merge date, to educate crypto folks on the events during the merge and their rippling effect across multiple ecosystems.

I am Chinmay, and I have decided to go through these discussions by the ssv network, held as twitter spaces, and write down key insights from what I learnt in the process.

This piece is a combined summary of the second and third episode. I will be following up with more blogposts, summarizing things up for non-geeky people alike.

If you want to first understand what is the Ethereum Merge, that’s the article.

The Builders of Bear Market

Let’s address the most striking question right now - how do we keep sane during such hard times.

All cryptocurrencies have crashed 60-70-80 %. The negatives are all over the place, but have you tried to look into the positives of a bear cycle ? I have something for you :

1. The current carnage has wiped out all the ponzi economics and their propagators, and that is healthy for the web3 ecosystem.
2. Moreover, such a market condition allows you to build experimental stuff, with lesser resources at stake, with much less noise and no token gurus around.
3. The leaders who have stayed throughout have faced a number of bear cycles before, and their belief in the system has only strengthened. 
4. Vs 2018, the infrastructure is already in place. The NFT and creator economy, DAOs and communities, Defi protocols and web3 social, all are thriving. There’s much more utility participation now.

Rule No.1 : Never lose money

Rule No. 2 : Never forget Rule No. 1**
-- Warren Buffett**

To put things in perspective, Crypto now has the backing of VC firms too 😉.

Valuable projects come out of bears, let’s survive and build.

How Does the Merge help the Crypto narrative

Eth 2.0 boils down to the idea of securing the network using capital. This helps the ecosystem in a no. of ways :

1. Capital is under most people’s reach. Thus Eth staking consensus improves accessibility to the network validators community. 
2. The technical barrier stands removed. Anyone can now participate through a node, without sophisticated mining facility or deep knowledge of the protocol itself.

Thus, Proof of Stake (PoS) promotes validator adoption.

The move to Proof of stake consensus engine is estimated to reduce Ethereum’s energy usage by a whopping 99.95 % compared to Proof of Work.

This helps the Blockchain narrative in following ways :

1. The (normie 😂) media’s notion of the ecological impact of blockchain being drastic stands muddled. Previously, people got turned off by the idea that their participation in blockchains would harm the environment.
2. This also helps the mainstream adoption by enabling an optimistic perspective of the technology as being energy efficient.

What’s the hype around the Merge ?

The merge brings about some fundamental changes to the network.

People are excited about a lot of stuff that’s going to be on the table :

1. The energy challenge has been solved. This removes a major psychological hurdle of developers as well.
2. Ethereum 2.0 is more secure, vigilant to attacks. It’s easier to recover from an attack.
3. Improved block times, cheap blockspace and being able to build on green ethereum rewards the developers.
4. Improved scalability (with further challenge of synchronization between nodes).
5. PoS brings Economic Finality, wherein the network agrees on a block that will never be reverted.

The transition process has been largely successful with a couple of testnets, Sepolia being the latest one.

The newsletter, Eth2.news is best to keep up with the highlights of this saga.

The importance of Layer 2 scaling

Layer 2’s inherit security from the underlying Ethereum. And their own chains are very effective at user interaction.

This combination inherently draws attention because of the simple reason : Ethereum users have faced high gas fees, UX issues and long block times.

And that is why projects like Optimism and Zero knowledge Rollups have opened up a lot of opportunities.

Post-merge upgrades are expected to lower down the layer 2 fees to pennies. This will have consequences like :

1. Anyone could create a Layer 2 for their own use-case and make it composable with other Layer 2’s.
2. Institutional rollups could be created, for a particular gaming ecosystem, or for being experimental. 
3. There would be instantaneous transaction confirmation and feedback by the network, without having to wait for a block to get mined on the Ethereum Mainnet.
4. Layer 2’s could possibly enable a global scale payments network based on blockchain.

All tech systems could gain the security benefits of the Ethereum network.

This entails massive adoption drives.

The role of the community

The web3 developer community is very very collaborative. If you’re a newbie, it will take time for you to fathom the amount of support everyone gets here. If you feel I’m exaggerating, let me narrate a related story :

The Prysm Client is one of the popular staking clients of the Ethereum platform. At a point of time, it became so popular that it acquired a majority share in the stakings on the Beacon chain. 

This can’t be safe and healthy for any network. So, there was a large push from the community to switch from Prysm to other clients to make its supermajority share go down.

Interestingly, the move was supported by the Prysm team itself. You can read a detailed version here. 

This goes to show that while competition in web3 exists, it doesn’t materialize.

To analyze the reason behind such a call, let’s look at the underlying first principles :

1. People come together naturally and work in a decentralized fashion. It is in everyone’s interest to contribute to the good of the protocol.
2. Crypto economics incentivizes common good. People tend to collaborate towards a strong protocol, because if they don’t, they will harm themselves.

Why does it take so long for Ethereum upgrades ?

Ethereum, like every other blockchain, is an open source protocol developed by the collective participants and developers who aim for the public good. 

It took 7+ years from vision to modelling to implementation for the PoS to take shape. A similarly long wait for sharding, and other improvisations.

This is because it follows a bazaar development model - it's noisy, a bit inefficient and chaotic, but its outcome is better because of the insights of such a large community. 

A more centralized development model could help ship faster, pull up upgrades. But the essence of decentralization would be lost. It would hinder organic ideas.

The openness to ideas and solutions, the permissionless-ness, censorship resistance, and radical resistance to centralizing pressures add to the winnings of Ethereum.

Beyond the Merge

The Merge is a small event, pertaining to the scale and long-term vision of the network and of VItalik Buterin. 

Let’s explore what’s in store immediately after Eth 2.0 arrival.

Single Slot Finality :

In theory, in Proof of Work, any block could be reverted if a longer chain appears at any time. Practically, the older the block gets, the lesser the probability of it getting reverted.

Though PoS brings the finality concept, it’s not full-proof on the implementation side. Once a block is finalized, the chain relies completely on its inability to getting reverted and the entire history before that block is protected. 

The flaws in this finality are :

1. It takes ~13 minutes to achieve this finality. It takes time for these messages to propagate to and get processed by ~400,000 validators.
2. We would need to limit traffic during finality. This would cause issues in transaction confirmations.

The answer is Single Slot Finality%20could%20also%20be%20cut.) - performs finality operations instantaneously and offers a massive security boost.

Beacon Chain Withdrawals :

At the time of Beacon chain launch, withdrawals were anticipated to begin post ~12 months, which would have been Dec. 2021. While it has taken longer than expected, the Eth community is aware of the time it takes in general for upgrades and thus has been very patient about it.

The devs would surely be having this as the next push in their mind.

Proto Dank Sharding :

This functionality would add a lot more blockspace for rollups and potentially increase throughput.

The plan seems to be to include proto danksharding and withdrawals in the next user-facing update, the Shanghai version, while SS finality could take years.

Conclusion

Protocols are reworking their tokenomic designs for the changes the bear market has brought about. The best strategy is to reward participants who take active risk for the protocol.

As an average user, we must try to move away from speculative activities towards utility at all costs. The SSV network may help you with staking.

SSV (= Secret Shared Validators) is an open source network protocol for devs to maximize ETH staking rewards while reducing risk. It enables this via scalable distributed validator technology.

It provides decentralized staking infrastructure for validator key sharing. One use case of it can be seen in the fact that it allows distributed validator node operation and control.

For example, if one of the 4 operators defaults or is under maintenance or offline, the other 3 partners will continue to serve the purpose – thus improving performance and reducing faults.

SSV also has the complete ecosystem with its own governance token, product and community. Pay them a visit – SSV Network

Their discord server has a channel #staking-society that will help you a lot.

We are getting ready for the Merge. and the after effects of it on DEFI. Tighten your seat belts folks !!

Show some support --

**

**