Ethereum Merge Guide: Everything You Need to Know

Disclaimer: This article aims to convey more market information and does not constitute any investment advice. The article only represents the author's viewpoint and does not represent the official stance of MarsBit

Disclaimer: This article aims to convey more market information and does not constitute any investment advice. The article only represents the author's viewpoint and does not represent the official stance of MarsBit.

Editor: Remember to follow me

Source: BeInCrypto

Original Title: EthereumMerge: Everything You NeedToKnow

The long-awaited Ethereum merger is coming soon. Around September 15th, we will witness a fundamental transformation in the technological foundation of the world's second largest cryptocurrency.

Merger may be an important milestone in the history of encryption, as it will reduce power demand by over 99% and make Ethereum more environmentally friendly. In addition to being more environmentally sustainable, this measure will also lay the foundation for many important optimizations. Considering that Ethereum remains the preferred platform for major DApp, NFT, and DeFi projects, its impact on more ecosystems may also be significant.

We hope that this guide will help you understand all the interesting facts about Ethereum mergers.

In this guide:

• Explain the "Three Dilemmas of Ethereum Expansion"
• What is Ethereum Merge?
• Ethereum Merge: Background
• Ethereum Merge: Good and Bad
• Will Ethereum merger affect ETH prices?
• What needs to be considered before merging?
• How to prepare for a merger?
• common problem

Explain the "Three Dilemmas of Ethereum Expansion"

The triple dilemma of Ethereum expansion can be said to be the most important unresolved issue in the blockchain field. It was originally proposed by VitalikButerin and TrentMcConaghy, referring to the reality of the current blockchain where every node validates every transaction and cannot have all of these attributes simultaneously:

Decentralization: Enable blockchain networks to operate independently of any centralized control point.

Scalability: The ability of blockchain networks to handle an increasing number of transactions and users without faltering due to increased transaction time and costs.

Security: The ability of blockchain networks to resist any attacks, vulnerabilities, or other similar unforeseeable issues.

The Ethereum merger aims to solve the three challenges of blockchain by increasing its scalability without affecting decentralization (or security). The next section will provide a detailed introduction to this.

What is Ethereum Merge?

The Ethereum Foundation refers to 'The Merge' as an upgrade that merges the Ethereum main network with the beacon chain. In this way, it will transform from proof-of-work to PoS consensus mechanism.

Simply put, this merger is an upgrade that will involve the Ethereum network and abandon traditional mining. Therefore, Ethereum no longer requires powerful computers to solve complex mathematical problems to ensure network security, and there is no longer a need for miners to be paid for mining. On the contrary, it will switch to the PoS consensus mechanism, where ETH token holders pledge ETH tokens as validators.

Understand the basic concepts of PoW and PoS, and read the detailed guide.

POS

Ethereum is betting on POS to solve the blockchain dilemma discussed in the previous section, as PoS greatly reduces the threshold for users to become network validators. This is almost the opposite of PoW, which requires expensive hardware and power consumption for mining. After the merger, users can use pledge ETH to become validators for creating new blocks on the chain and processing transactions.

Switching to PoS will also have a significant impact on Ethereum's carbon footprint. After the merger, Ethereum will become more environmentally friendly, and Bitcoin will become the only major blockchain network still using PoW.

In fact, the Ethereum Foundation estimates that the merger will reduce network energy consumption by 99.95%. Subsequently, the NFT industry will also be able to ultimately avoid all criticism surrounding its environmental impact.

In addition, mergers will also be the first step in many major upgrades to make Ethereum more scalable.

Ethereum Merge: Background

Currently, every Ethereum transaction and smart contract is recorded on the main network. For beginners, the Mainnet launched in July 2015 is the main Ethereum public chain, also known as the "Layer 1". Here, the operating principle of block verification is the same as that of Bitcoin, which is based on the PoW consensus mechanism.

This means that miners are participants in the blockchain, providing resources (computing power CPUs) to participate in block recording and packaging transactions. The main advantages of PoW include high security and good decentralization performance.

On the other hand, PoW requires a large amount of electricity because miners use hardware to support the operation of the system, and the equipment is very expensive, which is a high threshold for miners. Of course, these topics are not new. The developers of Ethereum initially laid the foundation for transitioning from PoW algorithm to PoS in the future.

The Beacon protocol (now known as Layer 2) was launched in December 2020 with the aim of improving these weaknesses.

Mergers are essentially transforming consensus mechanisms from PoW to PoS to validate transactions and ensure network security. It will be divided into three main stages:

• September 6, 2022- Bellatrix Upgrade
• Upgrade Paris on September 15, 2022
• Early 2023- Shanghai Upgrade

So, what will the merger bring to the community and company?

Ethereum Merge: Good and Bad

Merging will change block structure, block timing, opcode changes, and the possibility of block type recombination.

Most users may not even notice these changes. Firstly, Ethereum's gas fees or transaction speed will not undergo any significant changes overnight. Even the annual interest rate of the pledge (StackingAPR) will remain close to 50% (contrary to the current popular misconception of 200%)

In fact, many experts also believe that the hype surrounding the entire event may be a bit excessive.Especially when it comes to direct consequences.That is to say, whether the Merge will meet the reasonable expectations of the community remains an unresolved issue.

In short

Expert feedback from the Stormgainexchange team:

In addition to environmental impacts, the upgrade will also make Ethereum safer, more attractive to institutions, and enhance the overall image of cryptocurrencies. On the negative side, some communities claim that after the merger, the degree of Ethereum decentralization will decrease. Finally, some Ethereum miners are dissatisfied with this incident as they can no longer rely on mining to earn ETH tokens

Expert opinions from Golang developer SergeyUmarov and Emily team:

This transformation will fundamentally change Ethereum's token economy and reduce annual inflation to less than 1%. Therefore, due to the redistribution of combustion and release mechanisms, ETH will become an asset with value accumulation function

Will Ethereum merger affect ETH prices?

Most analysts avoid making predictions and warn against panic during periods of extreme volatility. Nevertheless, we have collected some opinions from some experts, as outlined below.

Expert feedback from the Stormgainexchange team:

Since the announcement of the merger date in mid July, the price of Ethereum has been on an upward trend. It is expected that the price of ETH will continue to rise after the merger is completed, as Ethereum will only become more scalable, energy-efficient, and potentially more valuable. However, as mergers have become common sense, traders may have considered new advantages

"However, some analysts, especially Vitalik Buterin, insist that the merger has not yet been priced by Ether. It is reported that the scale of ETH call option during the merger also exceeded the put option, which is another call indicator. Although nothing is certain, it is widely expected that the price will fluctuate greatly around the upgrade event itself, and then with the advantages of the upgrade, it will prove that the price will be in the long term Continuously rising

What needs to be considered before merging?

Expert feedback from the Stormgainexchange team:

For ETH, the first and simplest option is to do nothing because upgrading does not require any action, and the existing funds will not change

Secondly, holders should remind themselves of their keys, wallet access, etc. If they plan to speculate, they can prepare some ETHs to trade based on expected fluctuations during the merger period

Finally, remember the first point. Any email or message that requires the transfer of ETH or confirmation of private keys to benefit from the upgrade should be highly vigilant - the hype surrounding this incident may trigger many scams

How to prepare for a merger?

Generally speaking, most exchanges and other platforms do not provide any advice on the operations during the merger period. In fact, they really suggest not doing anything. However, some of them have already made statements regarding preventive measures and possible situations.

For example, Nexo will temporarily suspend the recharge and withdrawal of new ETH and ERC-20 tokens during the merger period. The platform stated that this is only a preventive measure to ensure the safety of user funds.

Similarly, OKX Exchange explained in their blog that if no new tokens are created, they will resume normal processing of ETH and ERC-20 tokens. If new tokens are created, they will be treated as ETH, while old tokens (generated through PoW) will be treated as forked tokens.

Expert feedback from the Stormgainexchange team:

During the merger period, it may be useful to observe signs of increased utilization of ETH or large-scale capital flows. The only number of locations holding ETH is the reference index, as well as the number of ETHs in mortgage deposits (currently exceeding 13 million). Finally, during the expected volatility period in early September, closely monitor 24-hour trading volume and monitor trading activity

Expert opinions from Golang developer SergeyUmarov and Emily team:

Transfer funds to Cold Wallet before the merger and avoid unnecessary fund transfers during the merger period. There may be a lot of speculation and false information about the merger in the media, so don't panic. Try to use official information from the developer community as a guide

Don't panic, stay vigilant

As you can see, there is no consensus on the direct outcome of the merger, especially in terms of ETH prices. The good news is that the big day is only about a week away, so the pain of waiting won't be too long.

As experts suggest, even if there are significant price fluctuations after the merger, it is important to avoid making hasty decisions due to emotions. Of course, unless there is a significant increase in prices. (If any)

As usual, BeInCrypto will closely monitor the follow-up impact of this highly anticipated event and bring you regular updates.

common problem

Will ETH rise after the merger?

Unable to accurately and convincingly predict the price trend after the merger. Most experts are very cautious in making predictions and warn against panic during periods of extreme volatility.

What happens to ETH when ETH2 comes out?

Before or after the merger, you do not need to do anything with your current ETH holdings. Your coins and tokens will remain unchanged.

Is Ethereum 2.0 better than Ethereum?

Ethereum 2.0 is expected to outperform Ethereum in multiple aspects. For example, it promises to provide better scalability and reduce energy consumption by more than 99%.

What is a merger?

The Ethereum Foundation stated that the merger is an upgrade to merge the Ethereum main network and beacon chain, transitioning from proof of work (PoW) to proof of equity (PoS) consensus mechanism.

When will Ethereum merge?

The Ethereum merger is expected to take place around September 15, 2022.

Responsible editor: Kate