Ethereum’s transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS), an event known as “The Merge,” was a major milestone in blockchain history.
The technical steps of this upgrade were formalized through Ethereum’s EIP-3675.
EIP-3675 is the Ethereum Improvement Proposal officially outlining Ethereum’s transition from PoW to PoS.
It laid the groundwork for 'The Merge' and defined the changes required to phase out the PoW mainnet in favor of the PoS-based Beacon Chain.
The Beacon Chain, launched in December 2020, introduced the PoS consensus mechanism but operated separately from the PoW chain. It managed validators and staking but did not process transactions.
Technically, Proof-of-Stake is a component of the Ethereum consensus mechanism to help the network protect against Sybil attacks.
EIP-3675 addressed several challenges with Ethereum’s original PoW consensus mechanism, including:
PoW requires significant computational resources to validate transactions and secure the network.
By 2021, Ethereum’s energy consumption had reached ~112 TWh/year, comparable to the Netherlands' total energy usage. This massive energy requirement resulted in substantial operational costs and environmental impact.
PoW allows miners with advanced hardware and cheap electricity, often in large-scale mining farms, to potentially dominate the network.
This could concentrate hashing power in a few large mining pools, reduce decentralization, and increase the risk of a 51% attack.
Such attacks occur when a single entity controls over half of a blockchain's power, allowing it to manipulate the network and potentially double-spend cryptocurrency.
Ethereum could only process 15-30 transactions per second using PoW. Far fewer than other blockchains like Solana (7,229 transactions per second) and traditional networks like Visa (65,000 transactions per second).
This low throughput led to network congestion during high-demand periods, increased gas fees, and resulted in longer transaction confirmation times.
EIP-3675 provided a clear solution to the challenges of PoW.
It introduced the roadmap to transition Ethereum’s consensus mechanism into the more efficient and sustainable PoS. It provided the following benefits for the network:
With PoS, Ethereum no longer relies on energy-intensive mining to secure the network. Instead, validators secure the network by staking a minimum of 32 ETH and being incentivized with fees and staking rewards.
This drastically reduced Ethereum’s energy consumption, as validators are selected based on their staked ETH and not the computing power they control.
The result is that Ethereum's energy consumption was reduced by approximately 99.95%, from 112 TWh annually to approximately 0.01 TWh.
In PoS, block proposers are randomly selected from the pool of all validators, and each validator has an equal chance to propose a block regardless of total staked ETH. This random selection makes it nearly impossible to predict or manipulate which validator will propose the next block, increasing network security and fairness.
PoS also introduced a slashing mechanism for dishonest validator behavior, making attacks more costly and risky. The slashing mechanism reduces or eliminates a validator's stake for malicious behavior and creates a strong financial incentive for validators to follow the rules.
PoS lays the technical foundation for Ethereum's scalability roadmap. One such future implementation is called Danksharding.
With Danksharding, Ethereum will scale by distributing large data blobs (a data type used to store large binary data) across network nodes, using data availability sampling to verify and retrieve data without downloading the entire dataset.
Danksharding is designed to provide more efficient support for Ethereum Layer 2 solutions, particularly rollups (protocols that process transactions off-chain) by increasing the network's data storage capacity and reducing the cost of posting rollup data to the mainnet.
Eventually, Danksharding will enable rollups to process thousands or even millions of transactions per second while also reducing gas fees.
EIP-3675 is a core protocol upgrade for Ethereum. While it doesn't define application-level functionality, EIP-3675 specifies the exact consensus-level changes required for adopting PoS and "The Merge," including:
The transition to Proof-of-Stake is a more sophisticated version of a hard fork. It involves multiple steps that eventually lead to the complete replacement of the consensus mechanism.
The initial setup involved running two parallel chains:
This dual-chain structure was necessary to facilitate the transition away from mining. It allowed for thorough testing and smoother preparation for The Merge.
Ethereum's execution layer continued handling state, transactions, and smart contracts, while the consensus layer was prepared to replace mining with staking.
Both layers communicated through the Engine API, and EIP-3675 ensured the existing chain state and history remained intact during the transition.
TTD is the cumulative difficulty threshold that, once reached, marks the final PoW block. The TTD trigger is set precisely at 58750000000000000000000 TTD.
After this point, all nodes must simultaneously recognize the TTD trigger, cease PoW operations, and activate the PoS consensus mechanism.
After the transition, the network runs entirely under PoS. Block production follows a structured schedule with fixed time slots, epoch architecture, and organized validator committees.
A randomly selected validator proposes a new block every 12 seconds (a slot), while a committee of validators attests to the most recent block’s validity.
Over an epoch (32 slots or 6.4 minutes), each validator is assigned to one committee (a set of randomly chosen validators whose votes are used to determine the validity of the block being proposed). This allows validators to participate in the attestation process. These attestations move the block toward finality, where it becomes irreversible.
PoS compensates validators for block proposals and attestations. If dishonest behavior is detected, the bad actor will be “slashed,” and penalized, including losing some (or all) of their ETH and being removed from the validator pool.
The diagram below illustrates how a block is added to Ethereum through PoS.
EIP-3675 ensures that every node, validator, and network participant follows the same rules during and after the transition to maintain network security and stability.
EIP-3675 enables scalable innovations. Here are its key impacts that will help drive mass adoption of Ethereum.
EIP-3675 made Ethereum one of the most energy-efficient blockchains, appealing to companies and individuals prioritizing sustainability and reducing their carbon footprint.
Essentially, reducing the environmental impact removes a major barrier to institutional adoption and public acceptance of the network.
ETH issuance dropped from ~13,000 ETH/day under PoW to ~1,700 ETH/day after The Merge, translating to an inflation rate of about ~0.5% annually, significantly limiting the amount of new ETH added to the total supply.
Moreover, PoS’s lower hardware requirements mean becoming a validator and generating income is now more accessible.
Lowering the barriers to becoming a validator has materially increased the Ethereum network’s decentralization.
Active participants in the network have grown from around 300,000 miners pre-Merge to over 1.6 million validators, according to data from Beaconcha.in. This broadens the distribution of network participants.
Having more validators means it’s more difficult for bad actors to disrupt the network.
More so, the introduction of the slashing mechanism ensures proper validator behavior. More than 446 validators have been slashed for attestation and proposal violations since The Merge, demonstrating the mechanism’s effectiveness.
These improvements in decentralization and security make Ethereum more attractive to institutions and users.
Under PoS, validators are rewarded according to their participation in securing the network. Unlike PoW’s fixed rewards, PoS rewards are dynamic. They come from a validator's activities, such as block proposal and attestation, and fees generated from processing transactions.
Dynamic rewards encourage consistent involvement in network activities. Validators who participate more earn greater rewards, which, in turn, attracts even more validators.
The “Paris Upgrade” of September 15, 2022, completed Ethereum's transition to Proof of Stake.
EIP-3675 delivered on its core promises: reduced energy consumption, decreased ETH issuance, increased network decentralization, and broadened validator participation.
The foundation created by PoS enables Ethereum's next phase of development: unlimited scaling, innovation, and a brighter future for the network.
