In September 2022, the Ethereum Merge is expected to replace Ethereum’s Mainnet with the Beacon Chain and other shared networks. With this change, Ethereum’s shift from its proof-of-work (PoW) paradigm to its proof-of-stake (PoS) model is complete.
To put it another way, see Ethereum as a racing vehicle and Beacon Chain as a new, more efficient engine that will be swapped in for the old one midway through the race. Except for how it operates, the automobile will retain its original features.
In what ways does Ethereum merge differ?
The Merge is formally defined by the Ethereum Foundation as the merging of Ethereum’s present execution layer (the Mainnet that we use today) with its new proof-of-stake consensus layer, the Beacon Chain. This definition comes from the Ethereum Foundation. Instead of the energy-intensive process of mining, the staking of Ethereum (ETH) is employed for network security.
The enhancement of the system’s energy sustainability serves as the key impetus for these efforts; yet, the increased security and scalability are very welcome side benefits.
The issue with Ethereum Merge is an important one to address. Since the introduction of dApps, smart contracts, and DeFi protocols, it has been beset by network congestion and high transaction costs, both of which began around the time its popularity among developers began to rise. Ethereum’s gas costs have increased as a result of the substantial surge in interest in DeFi; as a result, Ethereum’s transaction speeds have drastically slowed down in comparison to those of its most direct competitors.
To print the second-largest blockchain from one system to another requires a great deal of effort and time due to the complexity of the process. Every option requires considerable consideration and deliberation.
On the other hand, the Ethereum Merge Update plans to solve many of these problems, which will maintain the network one step ahead of its rivals and reward those users who have persisted with it up to this point.
But what is Proof of stake?
Proof-of-stake, often known as PoS, is a kind of consensus mechanism used to validate transactions that occur over a blockchain network. PoS is one of the ways that is used to verify that all of the transaction data that is kept on the web is genuine. Blockchain does not have any centralised authority that governs the system. Thus PoS is one of the methods that is employed.
The only significant difference between proof-of-stake and proof-of-work is that proof-of-stake uses a system to choose which members on the network are given the opportunity to undertake this job, which also comes with a profitable advantage. Individuals selected to carry out the transaction are eligible to get a freshly mined cryptocurrency reward if they successfully verify the new data and refrain from trying to game the system.
What does the Ethereum merge mean for the future of cryptocurrencies?
Due to its high market value, Ethereum is the second biggest blockchain network in the world and is scheduled for a significant update from September 10-20, 2022. As was previously noted, this update will result in Ethereum’s complete migration from the proof-of-work consensus process to the proof-of-stake mechanism.
This is one of the most significant changes in the crypto industry in a very long time, maybe even since the invention of crypto. When the Ethereum Mainnet and the Beacon Chain are combined, the blockchain will become more environmentally friendly, efficient, and enticing to investors.
When will Ethereum merge into the network?
The creator of ETH News, Evan Van Ness, has revealed that the Ethereum Merge is planned for the middle of September 2022. On a conference call broadcast on the Ethereum Foundation Youtube Channel on July 14, 2022, developer Tim Beiko highlighted the planned Merge date of September 19.
Impact of ETH 2.0
- Effective for network
First, moving away from Proof-of-Work (PoW) to Proof-of-Stake (PoS) is bright for the Ethereum network since PoS is a more logically efficient consensus method.
- Effective use of energy
One of the most revolutionary shifts in the cryptocurrency business, switching from PoW to PoS, would also reduce Ethereum’s current energy usage by 99.95 per cent.
- Sharding
By laying the groundwork for future scaling enhancements in the Ethereum ecosystem, sharding is a crucial step in preparing for the future of the crypto industry.
- The rationale for financial investment
If the Ethereum Merge is successfully implemented, it will alter the cryptocurrency’s core functionality, making it suitable for a broader range of applications and creating new opportunities for investors to get exposure to the dominant altcoin.
How will The Merge impact ether holders’ transaction times, gas costs, and staking?
- Rates of Exchange
After the update, Ether users may still anticipate the exact transaction times. The ordinary user won’t even notice the little adjustments.
- Gas prices
The cost of Ethereum’s “gas” won’t change for the time being. Theoretically, the Ethereum update paves the way for sharding, leading to lower gas prices in the future.
- Staking
Staking ether, rather than mining, will contribute to the safety of the network. Remember that staking ETH will not allow withdrawals for six to twelve months following The Merge. To counter this, once Ethereum’s Shanghai Upgrade is life, users can withdraw up to 40,000 staked ETH daily.
How much of a rise in ETH price is expected in the merger?
A longer-term increase in the number of people using Ethereum Merge would eventually cause the price of ETH to go up, but getting there would take some time. Those who are already on the Ethereum chain will have access to an expanded pool of opportunities if Ethereum Merge is implemented. As a direct consequence of this, generating profits in the near term would be very difficult.
However, these estimates are just that: projections; actual events might turn out to be very different from what is being predicted. Some experts have even projected that this could trigger a further spike in the price of Ethereum of between 200 and 500 percent. And bear in mind that this is only the beginning of the enhancements that will be implemented.
It is interesting to reflect on the events that transpired a year ago when Cardano initially offered the feature of intelligent contracts on its blockchain. Speculation around such news may, for a short period, push the price of ETH to levels of tokens that are unsustainable until the market corrects itself. Even while not all of the problems that Ethereum is now facing will be fixed, at least some will be. It’s possible that the actual integration won’t live up to the hype, much as Cardano’s smart contracts have in the past.
What does it mean for cryptocurrency investments?
There is a widespread consensus among professionals in this field that Ethereum’s fast progress will be jumpstarted if the Merge protocol can be effectively implemented on the leading network. This release places Ethereum in direct competition with all of the other PoS-based blockchain networks; considering Ethereum’s head start in TVL and the number of developers working on the blockchain, this puts Ethereum in an advantageous position.
Another cryptocurrency industry professional asserts that the Ethereum Merge will result in an increase in the value of Ethereum by cutting the platform’s consumption of energy by more than 99.95 percent while simultaneously improving its processing speed, security, and scalability.
It is projected that the success of Ethereum will have a ripple effect on other cryptocurrencies that are built on the ETH blockchain, such as Polygon (MATIC) and Arbitron. This impact will be positive.
The impact of the Merge on the On-chain metrics of Ethereum
Before the Merge, one of the most important on-chain measures for Ethereum must be the total value of the stakes made to the ETH 2.0 smart contract. This statistic must also be seen as positive. In spite of the decline in pricing during the course of the current year, it has been on an unbroken streak of gains. Therefore, it would seem that a significant number of individuals are placing positive bets on the Ethereum Merge with the anticipation of becoming validators in the Ethereum Network once the proof-of-stake mechanism is made operational.
Despite the bear market is in full swing for the last couple of months, the number of active Ethereum addresses on the network has been on an upward trend over the past couple of months. This further affirms the statement stated in the previous paragraph.
Conclusion
If the current Merge goes well, it will begin a more sustainable, environmentally friendly period for Ethereum, one in which proof-of-work will no longer be necessary. This will pave the way for future scalability enhancements previously impossible with proof-of-work, bringing Ethereum one step closer to the full scale, security, and sustainability envisioned in the Ethereum white paper.
With the necessary infrastructure in place, these updates will reorganize Ethereum to make it more scalable, safe, and sustainable, benefiting current users and attracting new ones. And it does so without compromising the decentralization that is Ethereum’s fundamental virtue.