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The Merge: Ethereum’s most important upgrade yet

The entire crypto space has been long anticipating the Ethereum upgrade. The most significant upgrade in the history of the Ethereum blockchain will finally become a reality with the upcoming Merge, transitioning from the Proof-of-Work (PoW) to the Proof-of-Stake (PoS) algorithm. The Merge is only a few days away, so let’s refresh our knowledge to better understand the actual change.

Let’s get technical

The merge defines the joining of two individual layers that currently exist in the Ethereum network. The mainnet layer of Ethereum that we use today will merge with a new PoS consensus layer, called the Beacon Chain. Created back in 2020, the Beacon Chain will introduce the PoS system into Ethereum and prepare the grounds for further scalability.

Sustainability, security, and scalability

The Merge will transform Ethereum into a more sustainable, secure and scalable network.

  • Sustainability

Ethereum’s ultimate goal is to lower its energy consumption by transitioning to the PoS validating system. Currently, it’s running the PoW algorithm where miners are competing with each other to solve complicated mathematical equations and add blocks to the blockchain. In doing so, they employ unimaginable computing resources which are bad for the environment. The PoS system will bypass the entire mining competition and reduce the energy consumption by ~99.95%, making Ethereum ESG compliant (environmental, social, and governance compliance).

  • Security

The PoS system will also increase the security and decentralization of the network. Proof-of-Stake requires validators to stake at least 32 ETH which serve as collateral in case of validator’s dishonest or malicious behavior. If a validator provided false information, they would lose their stake.

  • Scalability

Ethereum plans to improve its scalability by spreading the network’s load across 64 new chains known as “shards”. This sharding method will reduce network congestion and increase TPS which should in time also lower the transaction gas fees.

The truth is…

  • Ethereum gas fees will not get lower.

The Merge will not expand network capacity and it will not impact the price of gas fees.

According to Buterin, gas fees could drop in the future when the Layer 2 roll-up technology and sharding reduce network congestion and increase transactions per second.

  • Transaction processing will not become faster.

The block creation and settlement timing will not be substantial enough for Ethereum users to notice it.

  • The Merge will not result in downtime of the ETH Chain

The transition to a Proof-of-Stake (PoS) consensus mechanism should not cause any network downtime.

  • Stakers will not be able to unstake their ETH and claim rewards right after the Merge

Stakers will only be able to withdraw after the Shanghai upgrade which will follow in 6 to 12 months after The Merge.

The impact of the Merge

The Ethereum upgrade will expectedly have a ripple effect on the crypto industry. The end of Ethereum mining will affect thousands of miners and will consequently reduce the issuance of new ETH currently needed for mining rewards.

ETH holders don’t need to do anything with their funds or wallet before The Merge. They should only pay attention to scams trying to take advantage of this transition. But if you are a staking node operator and provider, a non-validating node operator and infrastructure provider, or a dApp and smart contract developer, you should check out the official Ethereum page for in-depth instructions.

Mark September 15th on your calendar when the new era of Ethereum begins.

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