The Ethereum Merge is one of the most important events in the blockchain ecosystem. However, most explanations of what the Merge means sound like a bunch of tech buzzwords jumbled together.
Here's a simpler explanation - you’re flying a plane, and while you’re midair, you will switch the current engine to another one that consumes less fuel. The plane is the Ethereum blockchain, the current engine is the Proof of Work, and the engine you’re switching to is the Proof of Stake.
Now that we’re back to the tech buzzwords; the infographic below explains what these terms mean:
What is the Ethereum Merge?
The Ethereum Merge is a transition of the Ethereum blockchain from the proof of work(PoW) model to the proof of stake(PoS) model. Ethereum’s blockchain (Mainnet) runs on the proof-of-work model to add and validate transactions and information. The problem with this model is that users or member computers need to solve complex math problems before they can create a new block. This method of mining is heavily energy-intensive.
The transition to the proof-of-stake model is because it consumes considerably less energy than proof-of-work. The proof-of-stake model uses an algorithm to randomly select validators to verify new information before it’s added to a block or to create a block.
Validators are users who invest their cryptocurrency for use as blockchain verification; this process is called staking. Selected stakers receive cryptocurrency in exchange for participating in the Ethereum blockchain process as long as they confirm correct information. If they deliberately verify the wrong information, they will lose their stake and opportunity to receive cryptocurrency.
Although the Ethereum Merge is receiving a lot of hype and attention because of its position as a host for the second most important cryptocurrency, it is not the first blockchain to implement proof-of-stake. Solana, Flow, and Cardano are already using the PoS model.
When is the Merge happening?
According to the Ethereum Foundation, the Merge is a two-step process. The first step is a network upgrade, Bellatrix, scheduled for 11:34 am UTC on Sept 6, 2022. The next step, of the transition, Paris, is expected to happen between Sept 10-20, 2022.
*At the time of writing this blog post, the Bellatrix upgrade had already happened.
How does the Merge affect you?
- If you are a trader that owns ETH, do nothing. Leave your ETH and NFTs hosted on the Ethereum blockchain alone. However, be extra cautious about scammers and fraudsters during this period. Scammers may try to trick you by promising a new ETH2 token. There is no such token. The upgrade will not give out or airdrop any new coins. They may also try to make you pay them or share your wallet details to upgrade your wallet to the “new Ethereum.” It is all a lie. Ignore or block and report such persons.
- If you are a staker on the Ethereum blockchain or you run a node, you will be advised by the Ethereum Foundation on what to do to guarantee a successful transition. However, if you’re a miner, you will no longer be able to mine ETH once the Merge is complete.
- If you make any transactions on a cryptocurrency exchange around the merge period, there might be a lag between deposit and withdrawal confirmations.
What happens after the Merge?
The Ethereum merge signals the beginning of more eco-friendly Ethereum functions. Building decentralized applications and validating Eth transactions will now use considerably less energy. This improvement is essential, primarily because of climate change and energy consumption concerns.
Once both steps of the merge upgrade are completed, Ethereum can scale more effectively towards its vision of sustainability, security, and innovation.
FAQs about the Ethereum Merge
- Will the Merge reduce gas fees?
Gas fees are the cost of making transactions on the Ethereum network. The fees are known to be frustratingly high. Unfortunately, the Merge will not reduce gas fees, for now, at least.
- What does the Ethereum Merge mean for ETH price?
Cryptocurrency prices have been a whirlwind since the beginning of this year. The Merge could boost the price of ETH if it’s successful. However, the crypto community is divided on this issue. Some people believe ETH will go up while others are skeptical.
- Will I get an ETH2 token airdrop after the Merge?
The Ethereum Foundation is not airdropping or giving out any free tokens. Any airdrop that claims to be “free ETH2” is likely to be a scam.
- Will transactions on the Ethereum Network be faster after The Merge?
Transaction speed will remain mostly the same. There might be a slight change in the speed of adding a block and finalizing transactions, but it won’t be noticeable to users.
Disclaimer: This article was written by the writer to provide guidance and understanding of cryptocurrency trading. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.