Post Merge

ETHEREUM
Introduction
The Ethereum Merge merges the PoW Mainnet + the Beacon Chain.
15 Sep 2022

There is only ONE

Ethereum blockchain.

1 Dec 2020

The PoW Mainnet handles transaction execution and holds the states of the blockchain.
The Beacon Chain allows users to deposit ETH (one-way) into a deposit contract. Before
the
Validators on the Beacon Chain record the state of the validator pool. Merge

A minimum of 16,384 validators is required to start Ethereum 2.0.

Introduction
Before the Merge:
ETH were issued at the PoW Mainnet when blocks and ommer blocks are mined.
Issuance of ~4,940,000 ETH/year
(2 ETH mining reward + 0.08 ETH ommer reward every 13.3 seconds)
ETH were issued at the Beacon Chain when validators come to a consensus on the state of

the validator pool.

Issuance of ~620,500 ETH/year

(Using 14,000,000 total ETH staked, approx. 1700 ETH/day is issued)
Introduction
'Eth1' now refers to the 'execution layer' handling transactions and execution.
'Eth2' now refers to the 'consensus layer' handling proof-of-stake consensus.

After the Merge:

Execution layer issuance is ZERO.

Consensus layer issuance is 1,700 ETH/day.

One of the objectives of the Merge is to reduce the rate of ETH issuance.

ETH are also burned (to reduce supply) in the following manners:
After
Transaction base fees (introduced in the London upgrade) the
Merge
Penalties to validators (slashing)
The London Upgrade
Took place on August 2021; specifies how transaction fees are calculated.

Before GasUsed * GasPrice

After GasUsed * priority fee

GasPrice / priority fee is an amount

specified by the sender.

Using the example above, a total of 21,000 * priority fee will be deducted from the
sender's account. Out of which:
21,000 * base gwei will be burnt “base gwei” fluctuates on a block-by-block basis.

21,000 * (priority fee – base) gwei will be paid to the validator

The objective is to control the inflation / deflation of ETH

The London Upgrade
Base Fees:
The base fee for the current block is determined by the blocks before it.

Target block size 15 million gas

Maximum block size 30 million gas

If Current block size > Target block size:

Increase the base fee for the next block
Maximum increase in base fee = 12.5%

Ethereum claims that this makes the transaction fees more predictable.
Slashing
Validators will be slashed if they:
Propose and sign two different blocks for the same slot (every 12 seconds) Slashed
Attest to a block that "surrounds" another one (effectively changing history) according to the
schedule below
Double voting by attesting to two candidates for the same block height
Activate
Do not submit attestations when required "inactivity leak"

Day 1: 1/32 ETH slashed Day 36: All stacked ETH slashed

Day 18: amount of ETH slashed

is based on a correlation penalty -
more validators slashed,
higher magnitude of slashing
Slashing
Inactivity: 1 epoch = 6.4 min

Inactivity Leak is activated if the Beacon Chain has >4 epochs without finalising.

When more than 1/3 validators fail to submit attestations within this period,
Their stake will bleed away until they control less than 1/3 of the total stake.
Note 1: The requirement is to have 2/3 majority to agree on the state.
Note 2: By 2/3 majority, it doesn't mean the "2/3 of the total number of validators".
Instead, it refers to 2/3 of the TOTAL STAKED ETHER.
Note 3: A staker can run multiple validators, assuming they have enough ETH at stake.
 An introduction

PROOF OF STAKE
 Terms
Term Description

staker
stake ETH and run validators

validator
For every 32 ETH staked, 1 validator is activated

proposer
a validator pseudorandomly selected to propose a block in a "slot"

attestor
a validator attesting to a proposed block

aggregator
a validator aggregating attestations to a proposed block

committee Made up of a group of validators - consists of 1 proposer, a group of

attestors and aggregators
 SHARDING

splitting the blockchain into smaller pieces and

process the pieces concurrently
 Shard Chains
The Ethereum network breaks up into 64 smaller shards (initial) with a total capacity for
1024 shards in the future.

Shard-chains need to be aggregated and verified in a single canonical source of truth.

Every 12s, 1 beacon chain block and up to 64 shard blocks are added.
Shard-chains will be reconciled with the main chain through crosslinks. How shard blocks
are added
A beacon chain block can contain up to 64 crosslinks, one for each shard.

Validators attest to "what is the most recent valid beacon chain block" and "what is the
most recent valid shard-chain blocks, aka head of chain".

Shard-chains have not yet been implemented.

 Terms
Term Description

32 slots per epoch

1 slot is 12 seconds
slot
1 block is proposed in every slot
1 committee per slot

1 epoch has 32 slots

1 epoch is 6.4 minutes
epoch All validators divided into 32 committees per epoch
The first block in each epoch is a checkpoint block

checkpoint the first block in each epoch

beacon block the block from the "main chain"; contains blocks from the shard-chains
 Graphically

Attestation

Current slot
Beacon block
Current epoch
checkpoint
Previous epoch
checkpoint

1 block proposer
The rest attest to the proposed block
 Beacon Chain Block
Proposed by 1 block proposer at each slot.

Attested by other validators in the committee for the slot. Attest on:
The slot that the block is in
The hash of the beacon block
The current epoch's checkpoint block
The last epoch's checkpoint block

The Beacon Chain block is the block in the Main Chain when sharding takes place.

A transaction is considered "finalised" if it has become part of a chain between two

finalised checkpoints.
 Rewards
Validator Reward:
Base reward + Inclusion delay

Base reward = effective_balance * (64 / (4 * sqrt(sum(active_balance))))

effective_balance : The validator's staked ETH

sum(active_balance): Total staked ether across all active validators

The base reward is further weighed based on the following components:

Timely vote for the correct source checkpoint (weigh = 14)
Timely vote for the correct target checkpoint (weigh = 26)
Timely vote for the correct head of chain block (weigh = 14)
Participated in a sync committee (weigh = 2)
Proposed a block in the correct slot (weigh = 8)
 Rewards
Light clients are small nodes able to
run on lower resource kit. For
example, mobile or embedded devices.

Note that a validator will not get the full base reward UNLESS it is a block proposer AND
participates in the sync committee.

Full Base reward = total_weigh/64 * base reward

If you are not a block proposer, you get only 7/8 * base reward.

A sync committee is a group of 512 validators, randomly assigned. This committee

continually signs block headers for each new slot in the beacon chain. A light client can
trust these headers to represent accurate and validated blocks.

A block proposer may also be rewarded for reporting evidence of misbehaviour; it will be
rewarded with
slashed_validators_effective_balance / 512
 Withdrawal
At present, validators' staked ETH cannot be withdrawn until the Shanghai upgrade.

After the Shanghai upgrade - stakers may exit and withdraw their balance
Six validators may exit in a given epoch
May reduce to four as more validators withdraw
 Keys
Externally Owned Accounts - Validator -
Public & private keys for sending transactions Public & private keys for attesting to blocks

Withdrawal - Lossof withdrawal privatekey =

Public & private key to withdraw stakes Lost access to staked ETH
References
https://blockdaemon.com/blog/ethereum-altair-hard-
folk-light-clients-sync-committees/

https://eth2book.info/altair/contents/

https://medium.com/coinmonks/ethereum-2-0-for-
dummies-part-1-why-upgrade-112d8f5b6d88

https://ethereum.org/en/developers/docs/

https://cointelegraph.com/ethereum-for-
beginners/ethereum-2-0-staking-a-beginners-guide-
on-how-to-stake-eth