What is the Ethereum Merge?
The Ethereum Merge is a network upgrade that will change Ethereum’s current consensus mechanism from “proof of work” to “proof of stake.” Along with other improvements, this milestone will help Ethereum deliver on its commitment to become more scalable, secure, and sustainable.
As of mid-September 2022, Ethereum has officially switched over to a Proof-of-Stake model. It has given birth to Ethereum 2.0 a new version of Ethereum. This will result in a 99.95% reduction in Ethereum’s energy consumption, and the ability to further scale the Ethereum ecosystem.
The switch has moved the entire blockchain over to new Proof-of-Stake validator nodes which require staking or locking up, 32 Ether (ETH) to join. Ether tokens will remain exactly the same for investors, and there should be no change to the operations of Ethereum-based applications. During the merge, users may not be able to transfer Ethereum-based assets.
What happens immediately after The Merge?
Once the merge is done, the already-running Beacon Chain will take over the process of validating new transactions through Proof-of-Stake and Ethereum’s legacy Proof-of-Work model will be put aside permanently. Validators have already staked over 13 million ETH on the Beacon Chain till date. As the mainnet (the main network of the Ethereum blockchain) is merged with the Beacon Chain, the full transaction history of Ethereum, plus all transaction, smart contract, and balance since July 2015, will also be merged.
Why is The Merge important?
In the history of cryptocurreny, The Merge is six years in the making and is considered by lot to be a milestone due to the potential material and philosophical implications. Additionally, a merge like this is an incredibly rare event in crypto, and may never happen again.
This milestone could also support market confidence and inject some much-needed optimism, after months of market volatility due to, among other factors, inflation and rising interest rates. As one commentator put it, Ethereum’s Merge “will prove that a decentralized and permissionless network can operate in an energy-efficient manner.”
How will The Merge impact me and my ETH?
From a user perspective, The Merge is expected to be and should be smooth. However, for those who staked their ETH, balances will not be unlocked nor will they be available to trade or transfer immediately after The Merge. Staked ETH is expected to be unlocked and accessible once the Ethereum protocol completes its upgrades. Current estimates on this upgrade completion is early 2023.
Ethereum Merge: Risks and challenges
Industry experts, crypto proponents and influencers have evaluated the potential risks and challenges associated with Ethereum Merge. Find the list below:
- Merge could trigger negative funding: There is growing difficulty amongst buyers about terrible investment. Traders with a plan to shop for Ethereum in spot markets and sell or stock and hedge in the future will receive ETHPoW tokens.
For no additional cost, These tokens will be airdropped and sold in open markets. Excess short positions in perpetual and futures contracts as a result of these trading strategies could result in negative funding. Negative funding implies traders are bearish, therefore it has emerged as a cause of concern.
2. Minor glitches could pop up along the way: With the current difficulty, hash rate and the pressure on the successful completion of the Merge, there is a likehood of certain minor glitches that might show up and be adjusted along the way. Proof-of-stake validators will shoulder the responsibility that miners took on, since Ethereum’s launch, therefore glitches are likely to show up.
