The Merge- Key Health Indicators
The Merge was completed without any issues, but the health of the chain will continue to be monitored. Validators uptime, block finalisation and client diversity all remain strong.
Introduction
After years of delays and setbacks, Ethereum has finally Merged, i.e., it has transitioned to a Proof of Stake network. This change to Proof of Stake has been planned even before the current Proof of Work Ethereum blockchain was created — that’s how long this has taken. The Merge combines the old ETH1 chain (execution chain) with the new ETH2 chain (Beacon chain). The Beacon chain has replaced the miners, but the execution chain remains the same, hence ETH holders do not have to do anything as their ETH still operates in the exact same way. In this update, we explore the key metrics related to the health of the Beacon Chain.
Validator Health
Looking at the security of the network, we see below that ~6,000 more validators have joined since September 1, 2022. There are now 428k validators securing the network with the minimum number of validators needed being 16,384 so the network has no issues here.
In fact, as shown below, over 200k ETH has been deposited into staking contracts over the past 2 weeks.
It should be noted that when ETH is staked it is locked up in a contract, and just like mining you get rewards for staking. However, these rewards are also locked up and despite the completion of the Merge — you will not be able to withdraw your staked ether or your rewards. In fact, withdrawals won’t be enabled for at least 6–12 months or longer. This means that over this time period there will be no new ETH entering the circulating supply and only downward pressure on the existing supply due to the burn rate. This is a rare event that we’re likely never to see again but it may cause buying pressure on ETH during that period but then sell pressure when withdrawals are eventually enabled, and validators can withdraw and sell their rewards.
Participation Rate
The Beacon chain participation rate, as the name implies, measures the percentage of validators that are online and performing their duties. The minimum participation rate needed for the Beacon chain to run optimally is 66.7% as two-thirds of a validator committee is needed to vote on a block. Below we show that since September 1, 2022, the participation rate has not dipped below 98%, well above the required minimum.
Block Health
Looking more closely at the health of the network blocks, we see below that over 98% of all blocks have been proposed while around 1% have been skipped. Skipped or missed blocks occur due to validators being offline or having a misconfigured client. Forked blocks are blocks that were replaced by another block and are a rarer occurrence and can happen for a variety of reasons.
Below we show a snapshot of finalised blocks (green) vs missed (red) blocks. Finalised blocks are those that have acquired enough votes and are then unable to be removed from the chain. An epoch is 32 blocks, but we’ve shortened the length for illustration purposes. Epochs and blocks can still finalise even if some blocks are missed.
Client Health
Client diversity is important for a more resilient network. An Ethereum client is a software application that implements Ethereum’s rules and communicates with other clients on the network. Proof of Stake is a new concept that adds additional layers of complexity above and beyond Proof of Work. To manage this complexity risk, Ethereum utilises multiple clients so that if a bug is found in one client, it does not affect the others. If a single client is used by 2/3rds (66%) of validators there’s a genuine risk this can result in disrupting the chain and monetary loss for node operators. The ideal state is one in which no client accounts for over 33% of the network.
Conclusion
The Ethereum Merge went off without a hitch. Every epoch and every block have thus far been finalised and the amount of missed blocks is not concerning. The amount of staked ETH continues to grow while network participation remains high. Furthermore, client diversity is robust and trending in the right direction. The Merge has thus far been quite uneventful and that is the sign of a healthy network.
For more insights into the Merge and our other research visit our research page.
