The Most Important Event in the history of Crypto — The Merge
Ethereum merge is going to be the 2nd most important event in the history of Cryptocurrency & Blockchain after the birth of bitcoin in 2008. The merge event is like a big movie that has been in production for years & finally it’s releasing around 10–20th sept. It will be a giant leap that opens door for enormous adoption for crypto.
We will do an analogy to understand the merge but you should have basic understanding about consensus protocols — Read Here
The Ethereum Main-net Today — Proof of Work
Ethereum today works on a PoW consensus where the miners have to compete and give computational power as a collateral for mining a block. This requires huge amount of energy as many miners compete at once for a specific block. Ethereum PoW is like a car with an old engine and runs on fuel which is not environmental friendly. Since many years after Ethereum’s inception, the founders have had this vision of making the network eco-friendly. The Beacon Chain was the first step.
The Beacon Chain — Proof of Stake
On 1st December 2020, the PoS version of Ethereum was shipped, it runs independent from the current Ethereum main-net. The Beacon Chain is like a an electric vehicle having an eco-friendly engine.
The Analogy
As said above, we have two cars, one that runs on fuel (Ethereum Mainnet Today) and is not eco-friendly while the other one is an electric car (The Beacon Chain). The end goal is to swap the engine from the PoS car into the PoW car i.e transition the consensus of mainnet from Proof of Work to Proof of Stake and this event is called the merge, but in the process of transition the PoW car cannot be stopped (The Current Mainnet cannot shut-down) that’s why it took 2 years to figure out the process. The new mainnet will have the same body (Transactions, Data, Nodes) but the engine will change (Consesus Protocol — PoS) that will slash the energy consumptions by 99% making Ethereum an eco-friendly blockchain.
The Event Timeline
The Testnet Merge
- Ropsten : June 8
- Sepolia : Jul 6
- Goerli : Aug 10
The Mainnet Merge
- Bellatrix Upgrade (6 Sept) : This upgrade prepares the Beacon Chain for the merge. The bellatrix upgrade went smooth and the merge is likely to go as schedule.
- Paris Upgrade (10–20 Sept) : The final merge.
What Changes?
- Energy Consumption reduced by 99%
- Ethereum Issuance : The number of tokens added to the supply. Post merge the daily addition will reduce by 90%.
- Mining rewards ~13,000 ETH/day pre-merge | Staking rewards ~1,600 ETH/day post-merge added to the circulating supply. And total 1600 Eth/day will be burned as gas fee. So the inflation will be zero — Read More
- The circulating supply will reduce as validators will stake Eth token. Currently around 10% of the supply is only staked.
What doesn’t?
- Transaction will not be faster as it’s only a consensus layer upgrade not execution layer.
- Fess will not reduce : GAS fee works like demand and supply, more the number of transaction more will be the fee. PoS doesn’t change the block size.
The Future
- All the validators staking ETH will not be allowed to unstake immediately : The withdraw /unstake update will come as a part of Shanghai Update.
- Sharding is the next anticipated feature of Ethereum that cannot exist without staking. PoS will pave way for sharding that will fasten the network.
- To all the Crypto and Blockchain minimalist : The Merge will boost crypto adoption.
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