Ethereum, the second largest cryptocurrency by market value has conducted its final test run for the long-awaited upgrade that will be a pivotal moment in the history of crypto. This upgrade is being called the ‘Merge’ and is said to be happening in mid-September. Before we go deeper into the details of this merge, we need to understand what exactly it is. Here are the top 10 things you need to know about the Ethereum ‘Merge’:
The ‘Merge’ refers to the event when the Ethereum blockchain changes from using Proof-of-Work (PoW) to Proof-of-Stake (PoS). Because two independent blockchains that are now operating in parallel will be merged, it is known as "the Merge’ due to the "Beacon Chain," a specialized blockchain, and the main Ethereum blockchain being combined, or "merged."
The beacon chain is empty of transactions. There are no DeFi applications or tokens. It is an empty blockchain that exists just to support the Proof of Stake consensus algorithm. Since the Beacon Chain is a "empty chain," it may join the Ethereum blockchain and replace the role of Ethereum's PoW system without having to worry about any other factors. A brand-new PoS consensus method will take the place of Ethereum's PoW validation once these two chains are combined.
In the history of cryptocurrency, no blockchain has seen such a profound transformation. A crucial aspect of a blockchain's operation is not changed very frequently, and none have undergone modifications with an economy as significant and well-developed as Ethereum's. TheMerge is a long-awaited moment in the crypto world, and it will likely change the industry tremendously, paving the way for future Ethereum upgrades and setting a precedent for other blockchain and DeFi upgrades in the future.
Ethereum's transition to a PoS consensus will bring numerous benefits, including improved efficiency, scalability, and security, as well as reduced centralization. One of the main outcomes of the Merge and transition to PoS is that it will reduce Ethereum’s energy consumption drastically. Ethereum, will consume about 99.5%less energy post-merge. Investors and authorities who care about the environment are concerned about the energy use associated with crypto currency mining. For instance, US legislators frequently criticize Bitcoin mining because of the network's significant carbon impact.
A common misconception is that the Merge will materially lower Ethereum’s transaction fees (gas fees).It was highlighted that the Merge does not increase network capacity but rather alters the consensus procedure. The relationship between network capacity and demand determines gas pricing. While switching from a PoW to a PoS consensus, the Merge does not significantly impact any aspects that directly affect network throughput or capacity. In future upgrades, Ethereum’s gas price may decrease but for now, it will remain unchanged following theMerge.
The economics of ETH have been significantly impacted by TheMerge. This element of the Merge is the most important to investors. Because of the Merge's reduced ETH supply and transformation into a native yield-bearing asset, ETH's economics are fundamentally altered.Because there is less of a need to compensate PoW miners, Ethereum may lower its annual ETH issuance from 4.3% to 0.43%, making Ethereum a deflationary asset. Most people view the decrease in additional ETH issuance as exceedingly positive.
Ethereum recently traded in the mid-$1,800 range, up more than 80% from its mid-July lows of under $1,000. While most of this has coincided with a general uptick in the cryptocurrency market with improved macro mood (Bitcoin is up over 25% from its mid-July lows), experts have noted that anticipation for the merger has been a key factor pushing ETH’s price higher.
ETH really seemed to take notice of the upcoming Merge when senior developer Tim Beiko tentatively put forth an official date for the Mainnet merge to take place this September. Anything that pushes that date back may weigh on ETH in the short-term. After the recent successful Goerli merge, combined with softer than expected US inflation figures for July that were just released, ETH prices could be in within a shot of hitting $2,000 in the very near future.
Given that this is one of the largest occasions in the whole history of the cryptocurrency sector, it is expected that many dishonest persons would try to take advantage of it in hopes of defrauding trusting individuals of their money. It is crucial to understand that prior to theMerge, users and holders of ETH do not need to make any changes to their accounts or wallets.
After the switch to PoS, Ethereum's complete history, going all the way back to its creation, will be preserved. After the Merge, all balances in wallets will remain accessible, and users and holders are not forced to update.
Ethereum critics, who are usually bitcoin maximalists relate the merge to replacing an airplane's engine in the middle of a passenger flight. Not just the aircraft but also the $183 billion worth of ether in circulation are under jeopardy. Undoubtedly, there are many risks involved in making a mistake, which is one of the primary reasons why theMerge has taken so long. As a result, there is plenty of testing and polishing going on behind the scenes.
No! A successful "Merge" also prepares the ground for the rest of the Ethereum roadmap which includes upgrades, known as"Surge," "Verge," "Purge," and"Splurge." Ethereum co-founder Vitalik Buterin discussed the upgrade path, which would make Ethereum "a far more scalable system," at the recent Ethereum Community Conference (EthCC) in Paris.
Future upgrades include supporting thousands of transactions per second to make applications faster and more affordable to use, improving its protocol's security against all types of attack as use of it rises, and being more environmentally friendly.
The merge is currently set to occur on September 15. Exciting potential and innovations are presented by the Merge and the rest of Ethereum's roadmap. Many followers of Ethereum anticipate positive outcomes, but it's yet unclear how these changes will affect the ecosystem.
Since cryptocurrency is still in its infancy, there is extreme potential for it to develop. There will be advancements in the future that no one can currently conceive but which will unquestionably be very important in this booming business.