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Five Things You May Not Know About The Ethereum Merge

Ethereum


A lot of people are still confused about the Ethereum merge and still aren't sure about what that would mean for us. 

A few days ago I was having a conversation with a few of my friends about the impending Ethereum merge. As the discussion went on, lots of things came up. One of them was saying something about low gas fees. How the merge will bring about instant low gas fees and increase transaction speed.

With this, I went on to do my research and found some things you should be aware of with the merge that people get confused with.

But before then let us take a look at the meaning of Ethereum merge and the role of Proof of Work and Proof of Stake.

What is Ethereum merge?

Some people call it Eth 2, Ethereum 2.0, or ETH 2.0. No matter what you choose to call it- The merge is set to replace Ethereum mainnet Proof of Work with the beacon chain Proof of Stake.

Ethereum merge is a long-planned Ethereum network upgrade. Although upgrades are normal, this is the biggest and will bring about changes that will likely determine the future of the Ethereum blockchain. It will merge the current Ethereum mainnet (the public Ethereum blockchain used by everybody) with the beacon chain. Presently, both chains exist differently, but only the mainnet with its proof of Work can validate transactions.

Once the merge is complete, the Ethereum mainnet will shift away from Proof of Work and adopt the Beacon Chain Proof of Stake consensus Mechanism. This means that instead of miners, the Ethereum blockchain will rely on trusted entities known as validators to verify transactions and add new blocks to the blockchain. Anyone can apply to be a validator by depositing 32 Ether (Ether is the native token of the Ethereum blockchain). In return, the validators will receive Ether as a reward.

Why is The Merge So Important?

You might be wondering why all these noises concerning the Ethereum merge. The answer is not far-fetched. Ethereum plays a very pivotal role in the blockchain ecosystem. First of all, it is the most-used blockchain and powers Ether, the second-largest cryptocurrency (second to bitcoin), with about $202 billion in market cap. The Ethereum Blockchain is home to numerous decentralized applications (dApps) and decentralized finance (DeFi) protocols and establishes the authenticity of millions of non-fungible tokens (NFTs). The implication is that whatever happens with the merge will not just affect the Ethereum blockchain, but other products and services relying on it.

Proof of Work & Proof of Stake?

Photo by Shahadat Rahman on Unsplash

Understanding these two concepts will help you to easily comprehend the topic. PoW and PoS are the two major consensus mechanisms (a consensus mechanism is a way a blockchain determines the legitimacy of a transaction) in crypto.

Since the genesis of the Ethereum blockchain, Proof of Work is the consensus mechanism. It involves miners around the world competing to validate transactions by solving a math puzzle. The winner gets to update the blockchain with the newest verified transaction and is rewarded by the network with a certain amount of crypto. But this activity requires a huge amount of processing power, making it unsafe for the environment.

In Proof of Stake, instead of miners, individuals who stake some certain amount of Ethereum will help validate transactions and secure the network. To be validating the proof of stake after the merge, you need to deposit at least 32 Eth.

Five Things You Must Know About Ethereum Merge

Below are five things every blockchain enthusiast must know concerning the impending merge;

No Action Is Required Of You For The Upgrade

According to information provided by Ethereum Foundation- No action is required of you as a user or holder of ETH. You do not need to do anything with your funds or wallet before the merge. Any funds held in your wallet before the merge will still be accessible after the merge. This is also a call to be weary of scams trying to take advantage of users during this merge period. Be careful of anyone asking you to take any action.

There Won’t Be Any Noticeable Change In The Speed Of Transaction

Contrary to the words on the street, the merge won’t speed up the time it takes for Ethereum to process transactions. But there will only be a slight change (not significant enough for Ethereum users to notice).

You Don’t Need 32 ETH To Run A Node

Running a node on the Ethereum network is free. The 32 Ether is needed to run a validator. Note that validators can’t alter protocol rules, all the nodes validate protocol rules. Investors will not be able to withdraw their staked Ether immediately after the merge, they will have to wait for six to 12 months following the merge.

The Merge Will Not Reduce Ethereum Gas Fee (Gas Fee is the cost of carrying out a transaction on the Ethereum blockchain)

Contrary to popular opinion that the merger will lead to low gas fees. Ethereum gas fee will remain the same for now. The merge will move Ethereum to proof of stake, but it will not expand network capacity. Thus, it will not affect the price of gas fees, which is considered a huge pain point for Ethereum users. The good news is that the merger will set the stage for sharding, making way for cheaper gas fees in the future.

Also, there is the possibility of a fork(a fork is a situation where Ethereum splits into two different networks). This may or may not happen, but according to the Ethereum team, any hard fork during the merge should be regarded as unofficial.

A Win For The Environment

The PoW consensus mechanism involves mining which consumes lots of energy. But this shift from proof of work to proof of stake will reduce the overall energy consumption of Ethereum by 99.9% or more. This is a huge win for the vast majority of the Ethereum community and a win for a sustainable environment.

Conclusion

The question on the lips of everyone now is the issue of “decentralization”. Critics have argued that proof of stake will make Ethereum more centralized and point to the dominance of a few entities holding staked Ether. This could be a setback as one of the core values of blockchain is decentralization, meaning that no single entity should be in charge. Well, this is a topic for another day. Before then, let us hope that the Ethereum merge achieves its potential.

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