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Ethereum Merge: What You Should Know

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Ethereum Merge is a technical enhancement that will convert Ethereum’s current proof-of-work consensus mechanism to a proof-of-stake model.

With this move, Ethereum hopes to significantly reduce its carbon footprint while also laying the groundwork for future scalability improvements as Ethereum 2.0.

What exactly is the Ethereum Merge?

The Merge represents the Ethereum network’s transition to proof-of-stake (PoS), its new system for authenticating crypto transactions (also known as a “consensus mechanism”).

The new system will replace the more power-hungry proof-of-work (PoW) mechanism pioneered by Bitcoin.

What is the significance of the “Merge”?

The Beacon Chain (introduced in 2020) is Ethereum’s PoS network, but it is not yet used for transaction processing.

For the time being, it is essentially just a staging area for computers running the Ethereum network in preparation for the PoS upgrade.

To fully transition to PoS, Ethereum’s Beacon Chain (the “Consensus” layer) must be combined with Ethereum’s PoW mainnet (the “Execution” layer).

What is the difference between proof-of-stake (PoS) and proof-of-work (PoW)?

The methods used to determine who has the right 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 puzzles.

To create blocks in the upcoming 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 system is rewarded with a combination of transaction fees and newly minted ether (ETH). PoS validators are also rewarded for other activities that help secure the network.

Will Ethereum fees be reduced following the merger?

Transaction fees for Ethereum are not expected to change as a result of the Merge.

Future network updates, such as danksharding and proto-danksharding, may help to alleviate Ethereum’s high network fees, but 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 woes.

Will the Merge increase the speed of Ethereum transactions?

Yes.

In today’s proof-of-work (PoW) system, 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 not a noticeable improvement for most users, and it keeps Ethereum behind rival blockchain networks like Solana and Avalanche (though well ahead of Bitcoin, where a new block is mined every 10 minutes on average).

Those looking for faster transaction speeds, like those looking for lower transaction fees, should look to Ethereum’s third-party rollups.

Will the Merge cause the price of ether (ETH) to rise?

It’s difficult to say.

With so many variables 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 upgrade to the network’s core technology.

Along with addressing environmental concerns, PoS will introduce a new form of utility 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 negative.

There is also the possibility (albeit remote) that the Merge will fail, or that PoS will prove less secure than PoW.

Is proof-of-stake preferable to proof-of-work?

There are costs and benefits.

According to the Ethereum Foundation, a non-profit organization that funds Ethereum ecosystem development, PoS will reduce Ethereum’s energy consumption by approximately 99.95%.

When will the Merge take place?

Around the 15th of September, 2022.
Why is there no set date?

Each block on Ethereum’s PoW network has a difficulty number that indicates how difficult it is for miners to add it to the network.

Rather than taking effect on a specific date, the Merge is set to take effect when the cumulative difficulty of all mined Ethereum blocks reaches a certain threshold – the “total terminal difficulty” (TTD).

Ethereum’s core developers set the TTD in August at 58,750,000,000,000,000,000,000, which will be reached around September 14 or 15. Because block difficulty and issuance rate change over time, we only have an estimate.

Can I become a validator or staker on Ethereum?

Yes, if you have some ETH on hand.
You can already “stake” 32 ether and earn rewards for validating Ethereum’s PoS Beacon Chain.

Staked ether will accrue network rewards, but withdrawal will be impossible until an update, which is expected six to twelve months after the Merge.

Staking necessitates some knowledge; if you make a mistake or go offline, your stake can be “slashed” (ie, reduced).

What happens to ether staked after the Merge?

Staked ether will be locked up with the network for six to twelve months after the Merge.

Those who have staked ether will be able to withdraw their stake, as well as any rewards that have accrued, at that point.

Will Ethereum holders be required to take any action following the Merge?

No. If you already have ether (ETH), you will not need to claim new “PoS ETH” or “ETH2” tokens. After the Merge, your balance will remain exactly the same, and you will be able to resume using the network as if nothing had changed.

Can the Merge go wrong?

Yes, but it’s highly unlikely.

The transition of Ethereum from proof-of-work to proof-of-stake will be the first of its kind. If the Merge is successful, it will be a huge feat of engineering and human coordination.

If it fails, hundreds of billions of dollars in value could be lost (ether’s market cap is close to $200 billion, and many other valuable tokens are built on top of it).

Ethereum Completes Final Network Test Before Merge

Ethereum today completed what its developers describe as the “absolute final dress rehearsal” for the historic and massive upgrade, which is expected to take place between September 13 and 15.

The 13th shadow fork of the Ethereum mainnet went live earlier today, apparently without incident.

Shadow forks are focused trial runs of aspects of the merge that test for potential issues and simulate the act of shifting the Ethereum mainnet’s underlying mechanism from the current, proof-of-work mining model to proof of stake, effectively ending mining on the network.