What is Ethereum the Merge?
In the past few weeks, the google search term for Ethereum, the Merge, has witnessed its all-time high (ATH).
The Merge was the union of Ethereum’s original execution layer with its new proof-of-stake consensus layer, the Beacon Chain. With the Merge, Ethereum’s proof-of-work consensus process has moved to the proof-of-stake system.
The Merge has removed the need for electricity-intensive mining and made it possible to secure the network with staked Ethereum. This is a huge step in solving the Trilemma problem that has plagued Ethereum for years, which included scalability, security, and sustainability issues. The Merge did the following:
- Merged the separate proof-of-stake blockchain called the Beacon Chain with the original Ethereum blockchain.
- The Merge reduced Ethereum’s energy consumption by 99.95%.
Ethereum’s Roadmap for The Merge
- Beacon Chain (Move to Proof of stake network)
Ethereum introduces proof-of-stake via Beacon Chain, a network distinct from Ethereum Mainnet.
2. The Merge
Merging Ethereum Mainnet and Beacon Chain will complete the shift from proof-of-work to proof-of-stake.
3. Sharding
The next phase will improve Ethereum’s scalability and efficiency by dividing the blockchain into shard chains or smaller blocks.
Why is the Merge important?
Throughout Ethereum’s existence, its developers have prepared for the inevitable switch from proof-of-work to proof-of-stake. The Beacon Chain was first launched as a separate blockchain from Mainnet on December 1, 2020, operating in parallel.
Beacon Chain is the consensus engine for all network data, including execution layer transactions and account balances, following The Merge. In other words, Ethereum has transitioned from proof of work to proof of stake.
This implies that Ethereum holders who have their Ethereum locked up in “stakes” or what is generally known as “master nodes” will receive the transaction fee instead of miners. The electricity needed to power the network would be lessened via proof-of-stake validation.
Consequently, its total effectiveness will increase, and its long-term environmental impact will be reduced. Ethereum’s The Merge will demonstrate how a permissionless, decentralized network can function in an energy-efficient way.
A merge like this is also exceedingly uncommon in the crypto ecosystem. Hence, the buzz around it.
What occurs shortly following The Merge?
The Merge signified the official transfer to the Beacon Chain as the means of producing blocks. No longer is mining the method for producing valid blocks. In its place, proof-of-stake validators are now responsible for assessing the authenticity of all transactions and proposing new blocks.
The Merge caused no historical loss. As Mainnet and Beacon Chain merged, the full Ethereum transaction history was also merged.
See also: Does Technical Analysis Make a Good Trader? (Technical Analysis for Beginners)
What Happens to Holders and Users of Ethereum?
As an Ethereum user or holder of ETH or any other digital asset, you do not need to take action with your funds or wallet in response to The Merge. Ethereum remains unchanged.
There is no “ETH1” or “ETH2,” and wallets function just as they did before The Merge.
Despite replacing proof-of-work with proof-of-stake, the whole history of Ethereum since its inception remained intact and unmodified. Any funds in your wallet before The Merge will still be accessible following The Merge. No action is necessary on your part to upgrade.
See also: The Story of Bitcoin: The Novel Technology Made by an Invisible Creator.
Will the price of Ethereum increase after the Merge?
This is a significant week for Ethereum since its Merge has been completed, and investors may see significant price fluctuation. According to experts, the Merge can potentially increase the value of Ethereum, a cryptocurrency that, like bitcoin, faces continuous struggles amidst larger economic uncertainties.
Therefore, Ethereum prices could potentially rise in the next days or decrease if the Fed announces another rate hike.
Misconceptions about The Merge
- The Ethereum Merge Updates Will Decrease the Network Gas Fee.
The Proof of Work blockchain has been replaced by the Proof of Stake blockchains — the Beacon chain — on the Ethereum network. The Merge will not expand the network’s capacity to process more transactions. The Ethereum developer community is focused on improving the network’s throughput using Sharding as a roll-up mechanism in its future upgrade.
2. The Merge May Cause Downtime of the Network.
Changing PoW to PoS will not necessarily halt network operations unless a technical problem arises. The developers have ruled out the likelihood of a Merge-related shutdown.
3. Ethereum Merge Will Increase the Speed of The Blockchain and The Decentralized Applications Constructed on Top of Ethereum.
The ETH upgrade will not fundamentally boost transaction speed. Still, it will increase the block generation time since validators will push blocks every 12 seconds, compared to 13.3 seconds on the mainnet Beacon chain. The developers expect that the updated blockchain will enhance the rate of block production by 10%.
4. Ethereum 2.0 Will Airdrop Eth2 Tokens to Current Blockchain Investors.
The Merge is often mistaken for a hard fork. In the event of a hard fork, token holders will receive tokens generated on the forked blockchain. Ethereum 2.0 is merely an upgrade to the network, not a hard fork.
Conclusion
The Merge was the union of the original execution layer of the Ethereum network with its new proof-of-stake consensus layer, the Beacon Chain. The Merge has removed the need for electricity-intensive mining and made it possible to secure the network with investors’ stakes. The Merge of the Proof of Work (PoW) and Proof of Stake (PoS) blockchains has been completed on the mainnet of the Ethereum network. There is no “ETH1” or “ETH2,” and wallets function just as they did before The Merge.
New to trading? Try crypto trading bots or copy trading
