Ethereum Merge IS VERY CLOSE! Why it matters and what it means
Just a few hours from now, Ethereum’s long-awaited “The Merge” software update will shift the cryptocurrency’s proof-of-work (PoW) process to proof-of-stake (PoS).
The Ethereum Merge has drawn a lot of attention, dominated a lot of the spotlight, deep discussions about the future of Ethereum, and a lot of technical analysts. Still, following the upgrade, one cannot overlook the energy-efficient mechanism.
The Ethereum Foundation estimates that PoS will reduce Ethereum’s energy consumption by around 99.95%. The foundation, a non-profit company, supports the expansion of the Ethereum ecosystem.
But before going into the deep discussion, let’s understand some basics of the Ethereum merge and what does it mean?
What is The Ethereum Merge?
The Merge is the combination of Ethereum’s new Beacon Chain proof-of-stake consensus layer with its current execution layer (the Mainnet we currently use). Instead of using energy-intensive mining, it uses staked ETH to secure the network. An exciting step toward achieving the scalability, security, and sustainability goals of Ethereum.
It’s essential to keep in mind that the Beacon Chain first shipped apart from Mainnet. While the Beacon Chain operates simultaneously with proof-of-stake, the Ethereum Mainnet, with all of its accounts, balances, smart contracts, and blockchain information, continues to be secured by proof-of-work. When these two systems eventually converge at the next Merge, proof-of-stake will completely replace proof-of-work.
Merging with Mainnet
Proof-of-work has secured Mainnet since its beginning. It has held each transaction, smart contract, and balance since Ethereum’s launch in July 2015. This is the Ethereum blockchain that we are all familiar with.
Developers have been actively working on preparing Ethereum for a possible switch from proof-of-work to proof-of-stake throughout the platform’s existence. The Beacon Chain was created on December 1, 2020, and it has since existed with Mainnet as a separate blockchain.
The Beacon Chain has not handled transactions on the Mainnet. Instead, it has decided on active validators and their account balances to gain consensus on its state. The time for the Beacon Chain to agree on more is approaching after extensive testing. Including execution layer transactions and account balances, the Beacon Chain will serve as the consensus engine for all network data after The Ethereum Merge.
The Beacon Chain will now be the official mechanism for producing blocks as of the Ethereum Merge. Valid blocks can no longer be created by mining. In its place, the proof-of-stake validators take on this responsibility and are in charge of processing all transactions’ validity and proposing blocks.
What need I do to prepare?
In the long run, everyone will be affected by The Ethereum Merge, but in the short term, some people will need to take action to be fully prepared. The Ethereum Merge is one of the most significant and anticipated upgrades in the history of Ethereum.
To keep your money safe as it enters The Ethereum Merge, there is nothing you need to do.
It’s important to clarify that you do not need to do anything with your money or wallet before The Ethereum Merge if you are a user or holder of ETH or any other digital asset on Ethereum, including non-node-operating stakes.
After switching to proof-of-stake, Ethereum’s complete history of its creation is still intact and unchanged. After The Ethereum Merge, you will still be able to access any money that was in your wallet before The Merge. You don’t need to do anything to upgrade.
It would be best if you were super cautious of scammers trying to take advantage of people during this transition as The Merge of Ethereum Mainnet comes near. There is no “ETH2” token, and there is nothing else you need to do for your money to be safe, so don’t send your ETH somewhere to “upgrade to ETH2.”
What date is The Ethereum Merge?
After being discussed for more than eight years, The Ethereum Merge will finally happen around September 15. The change would shift Ethereum to a more energy-efficient infrastructure, resolving the common complaint that the negative impacts of cryptocurrencies on the climate dominate the positive effects.
What happens immediately after The Ethereum Merge?
Once finished, Ethereum’s traditional Proof-of-Work mechanism will be permanently discontinued, and the Beacon Chain will take over the function of validating new transactions through Proof-of-Stake. Over 13 million ETH have already been staked on the Beacon Chain by validators. The whole transaction history of Ethereum, including each transaction, smart contract, and balance from July 2015, will be combined as the mainnet (the main network of the Ethereum blockchain) merges with the Beacon Chain.
This will eventually decrease the energy consumption on the Ethereum network by 99.9% hence making it more eco-friendly to the environment. Furthermore, Ethereum will be ESG Compliant which will be good for more regulatory-driven institutions to start exploring the Ethereum ecosystem. After Ethereum Merge it will attract more gaming enthusiasts and NFT Artists who were concerned about the environmental impact caused due to crypto.
Why does The Ethereum Merge matter?
Due to the possible material and philosophical implications, The Merge, which has been six years in the making, is regarded by many as a turning point in the history of cryptocurrencies. After months of market volatility brought on, among other things, by inflation and rising interest rates, this milestone could also boost market confidence and inject some much-needed optimism. A merge like this is an extremely rare event in crypto. As one commentator put it, it may never happen again, “proving that a decentralized and permissionless network can operate in an energy-efficient manner.”
Will The Ethereum Merge reduce gas fees?
Because the upgrade is focused on changing the consensus mechanism (the method Ethereum validates transactions) rather than expanding or increasing its capacity, The Ethereum Merge is unlikely to result in a short-term reduction in gas fees.
In other words, The Ethereum Merge will phase out PoW and convert the blockchain to PoS, but it is not expected that this change will impact the blockchain’s capacity. The Ethereum Merge won’t directly affect gas fees because gas prices result from demand vs. network capacity rather than how the blockchain validates transactions.
Will it cause the price of ether to go up?
Since the beginning of the year, Ether’s price has fallen by around 55%, and many people are hopeful that the Ethereum merger will increase it. In recent months, this topic has generated a lot of discussion in the crypto community, and no one is certain how the Ethereum Merge would affect the price of Ether.
People predict that Ether’s price will rise after the Ethereum Merge for two main reasons. The first is the idea that large corporations will find it simpler to invest in Ether and develop Ethereum apps if Ethereum fractionates its carbon footprint.
According to Charbonneau, who was referring to environmental, social, and corporate governance standards for ethical investing, “the reality is, if you take the environmental caring part away, there are a lot of people who are not going to use it [ethereum] and not want to invest in it just based on ESG reasons.” Many tech firms have publicly said they won’t take action until after the Ethereum Merge.
The second justification offered by some is a little more technical. Ethereum mining is expensive; as electricity costs have increased and cryptocurrency values have decreased, even profitable mining businesses have started to lose money. To cover expenses, miners often sell most of the cryptocurrency they produce as miners sell their ether, generating millions of dollars in sell pressure daily. Since validating blocks is much less expensive than mining them using proof of work cryptography, miners (or “validators,” as they will be called) won’t have to sell all the ether they earn once Ethereum has proof of stake.
However, some argue that the Merge is already included in the price. According to the argument, the Ethereum Merge has been planned for seven years, and many significant investors have invested in ethereum in expectation of its success.
What other upgrades are coming after The Ethereum Merge is complete?
Following The Ethereum Merge, several additional upgrades have been released. The surge, verge, purge, and splurge are the names of the rhyme-making upgrades. The Shanghai upgrade, which will allow for the withdrawal of staked ETH, and sharding, which attempts to increase scalability by distributing the strain of managing and processing massive volumes of data over a whole network, are two components of the surge. It is a significant step towards greater decentralization that The Verge will enable consumers to become network validators without the need to retain a lot of data. Old network history will be removed during the purge, and the splurge refers to fine-tuning its previous steps.
The successful completion of this Ethereum Merge will mark the end of Ethereum’s proof-of-work system and the beginning of a more environmentally friendly, long-lasting Ethereum. This will also open the door for more scalability enhancements that would not be feasible under proof-of-work, advancing Ethereum toward the full scale, security, and sustainability anticipated in its Ethereum vision.
These updates will reorganize Ethereum to make it more scalable, safe, and sustainable to enhance existing users’ lives and possibly attract new ones now that the technology is available. All this is done while maintaining decentralization, Ethereum’s core value.
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