Ethereum Merge: What You Need to Know
The Merge is the most major improvement in Ethereum’s history. To ensure a secure transition to proof-of-stake, extensive testing and bug bounties were conducted.
This procedure is nearing completion. The Merge has been announced now that the testnets have been merged.
What is The Merge?
The Merge reflects the union of Ethereum’s existing execution layer (the Mainnet we use today) and the Beacon Chain, its new proof-of-stake consensus layer. It does away with the necessity for energy-intensive mining in favour of securing the network using staked ETH. A tremendously exciting step in realising the Ethereum objective – increased scalability, security, and sustainability.
Why is it called the Merge?
The Beacon Chain (announced in 2020) is Ethereum’s PoS network, but it is not yet used for transaction processing. For the time being, it is effectively just a staging location for machines running the Ethereum network in preparation for the PoS upgrade.
To fully convert to PoS, Ethereum’s Beacon Chain (the “Consensus” layer) must be combined with Ethereum’s PoW mainnet (the “Execution” layer).
What should I do to get ready?
The Merge is one of the most major and anticipated improvements in Ethereum history, and while its impact will be felt by everyone in the long run, some people will need to take action in the short term to be completely prepared.
Users and holders
You do not need to do anything to safeguard your cash once they enter The Merge.
This needs to be stated again: As a user or holder of ETH or any other digital asset on Ethereum, as well as non-node-operating stakers, you are not required to do anything with your assets or wallet prior to The Merge.
Despite the switch from proof-of-work to proof-of-stake, Ethereum’s entire history since its inception remains intact and unchanged. Any funds in your wallet prior to The Merge will remain available after The Merge. You are not required to take any action to upgrade.
As the Ethereum Mainnet Merge approaches, you should be on the lookout for scammers attempting to take advantage of people during this transition. Do not transfer your ETH somewhere in an attempt to “upgrade to ETH2,” as there is no “ETH2” token and nothing further you need to do to keep your assets safe.
Difference between proof-of-stake (PoS) and proof-of-work (PoW)?
The methods used to determine who has the privilege to record the next “block” of transactions on the network differ between proof-of-stake (PoS) and proof-of-work (PoW).
Similarly to Bitcoin, Ethereum miners compete to publish blocks in today’s PoW system by racing to solve cryptographic problems.
To construct blocks in the forthcoming PoS system, validators who stake (lock up) at least 32 ether ($50,000) with the network are chosen at random. The more ether one stakes, the more likely it is that one will be chosen.
The miner/validator who wins a block in either scheme is paid with a combination of transaction fees and newly minted ether (ETH). PoS validators are also rewarded for various acts that assist protect the network.
Will Ethereum fees decrease/increase after the Merge?
Transaction fees for Ethereum are not expected to alter as a result of the Merge. Future network improvements, such as danksharding and proto-danksharding, may assist to alleviate Ethereum’s high network fees, however, these are not expected until at least 2023.
Rollups, third-party networks like Arbitrum and Optimism that bundle transactions and process them separately from Ethereum’s mainnet, remain the primary solution to Ethereum’s transaction fee concerns.
Will the Merge boost the speed of Ethereum transactions?
In today’s proof-of-work (PoW) method, Ethereum blocks are issued once every 13 or 14 seconds on average. Proof-of-stake (PoS) blocks will be issued at regular 12-second intervals following the merge. This is hardly a noticeable improvement for most users, and it keeps Ethereum behind other blockchain networks like Solana and Avalanche (though well ahead of Bitcoin, where a new block is mined every 10 minutes on average).
Those searching for faster transaction speeds, like those wanting lower transaction costs, could go to Ethereum’s third-party rollups.
Will the Merge raise the price of ether (ETH)?
With so many factors and unknowns, predicting what will happen to Ethereum’s token price as a result of the Merge is impossible.
For years, the Ethereum community has positioned the Merge as a significant update to the network’s basic infrastructure. Along with addressing environmental problems, PoS will bring a new type of usefulness for Ethereum’s native ether (ETH) token in the form of staking.
However, the Merge does not guarantee that the ETH price will rise. The Merge will also alter the rate at which ether is issued and the manner in which it is distributed. Depending on who you ask, these changes could be positive or detrimental. There is also the possibility (although remote) that the Merge will fail, or that PoS will be less secure than PoW.
There is also suspicion that the market has already priced in the Merge.
When will the Merge take place?
The Merge is planned to be released in Q3/Q4 2022. The client developers are currently working toward a soft target of September 19th, 2022, although this could alter dependent on the success of the final testnet merging (Goerli) in mid-August, continuous client refinements, and the hash rate of the existing miners continuing to rise predictably. Everyone is working tirelessly to complete The Merge as quickly as feasible.
The TTD was set at 58,750,000,000,000,000,000,000 by Ethereum’s core developers in August, and it will be reached somewhere around September 14 or 15. Because block difficulty and issuance rate change over time, we only have an approximation.
What will happen after the Merge?
This will mark the end of Ethereum’s proof-of-work era and usher in a more sustainable, environmentally friendly Ethereum. Learn more about Ethereum’s energy usage.
This will also pave the way for other scalability enhancements not achievable with proof-of-work, bringing Ethereum one step closer to the full scale, security, and sustainability stated in its Ethereum vision.
Myths About The Merge
- Staking 32 ETH is required to run a node.
- The Merge will lower gas prices.
- After The Merge, transactions will be substantially faster.
- Once The Merge occurs, you will be able to withdraw your staked ETH.
- Validators will not be rewarded with liquid ETH until the Shanghai upgrade when withdrawals will be authorised.
- When withdrawals are enabled, all stakeholders will exit at the same time.
- After The Merge, staking APR is predicted to treble.
- The Merge will cause the chain to go down.
Thank you for taking the time to read this! I hope you enjoyed our article and we have provided you with some information that will be useful to you in the future. Read more articles related to finance on Behindyourgoals.