The Ethereum Merge: The Biggest Upgrade In Ethereum's History Is Here

 

      The Merge is the most significant upgrade in Ethereum's history. It is probably that is everywhere on the internet. So what is this upgrade, when does it take place and how will it affect the future of Ethereum? All the answers will be sourced for in this article.

     So anyways, what is the Merge? Simply put, it is defined as the transition of Ethereum from proof-of-work mechanism to proof-of-stake mechanism. In other words, it is the bonding of the existing execution layer of Ethereum (the Mainnet) with its new proof-of-stake consensus layer, the Beacon Chain. It eliminates the need for energy-intensive mining and instead secures the network using staked ETH. The Merge is a bold step in fulfilling Ethereum's mission- more scalability, security and sustainability. Initially, the Beacon Chain came separate from the mainnet. Ethereum Mainnet which containes all the accounts, balances, smart contracts, transaction and blockchain state is still governed by the proof-of-work mechanism. The Beacon Chain on the other hand runs in parallel using proof-of-stake. So these two layers bond together in what is called the Merge. To explain how the merge is suppose to be executed, let's use analogy. Picture a car running on the highway. The Merge is like the transition of the car's engine from gas to electric while in motion.  The mission is to achieve this while in motion. So a unit electrical engine is built for running safety checks beforehand to ensure the smooth transition to electricity without bringing the car coming to a halt.

     In the same way, before successful transition from proof-of-work to proof-of-stake, the beacon chain has been tested on proof-of-stake mechanism by Ethereum developers for a year and a half and is now about to be merged with Ethereum mainnet layer which currently runs on the proof-of-work mechanism.

Before The Merge

     So let's take a brief look behind the scenes on the effort that has been put in to ensure the success of the Merge upgrade. 

     Since the origin, the Ethereum mainnet has always been backed by proof-of-work mechanism. It is the blockchain we are all used to. It contains just about every transaction, smart contract and balance since its origin in July 2015. Throughout Ethereum's history, developers have been at work preparing for the eventual transition away from proof-of-work to proof-of-stake. On December 1, 2020, the Beacon Chain was created, which has since existed as a separate blockchain to mainnet running in parallel. 

     The Beacon Chain has not been processing mainnet transactions. Instead, it has been reaching consensus on its own state by agreeing on active validators and their account balances. After extensive testing, the Beacon Chain's period to reach consensus is rapidly approaching. After the Merge, the Beacon Chain will be the consensus engine of all network data including execution layer transactions and account balances.

     The Merge will represent the official transition to the proof-of-stake using the Beacon Chain as the engine block of production. That means mining will no longer be the means of creation of valid blocks. Instead, the proof-of-stake validators assume this role and will be responsible for processing the validity of all transactions and proposing blocks. As the mainnet gets merged with the Beacon Chain, it will also merge the entire transaction history of Ethereum.

FAQs On The Merge

• What happens to your assets after the Merge?  As a user or holder of ETH or any other digital assets on the Ethereum blockchain, you may wonder what happens to your funds during the Merge but you do not need to touch your funds or wallets before the Merge. Despite the transition to proof-of-work, the entire history of Ethereum singe genesis remains intact and unaltered after the transition to proof-of-stake. Any funds held in your wallet will still be accessible after the Merge. No action is required for upgrade on your part. Meanwhile, be on high alert for scams trying to take advantage of users during this transition. Do not send your ETH anywhere in an attempt to upgrade to ETH 2. There is no "ETH 2" token and there is nothing more you need to do for your funds to remain safe. Scammers may appear in the form of "support" telling you that if you deposit your ETH, you will receive back "ETH 2". Also be on the alert for Ethereum airdrop scams. This usually involves you signing in with your Ethereum wallet and approving a transaction. When attempting to claim, this transaction compromises your account by sending your public and private keys to the scammer. An alternative form of this scam may have you confirming a transaction that sends funds to the scammer's account.

 

• So what date is the Merge? The Merge is set to kick off sometime between Sept 13-16. The Bellatrix Upgrade - the network's final hard fork before the Merge was activated last week marking the beginning of Ethereum's long-awaited transition from proof-of-work(PoW) to proof-of-stake(PoS). The Bellatrix Upgrade is part of the test phase of Ethereum's PoS Beacon Chain also called consensus layer - for a merge with Ethereum's Mainnet execution layer. The Terminal Total Difficulty(TTD) triggering the Merge has been set at 58,750,000,000,000,000,000,000. This number which will represent the cumulative difficulty of all mined blocks will be reached around September 15. Immediately the target is reached, the network will merge its execution layer with the new PoS consensus layer allowing the chain to continue on with a new system for issues and authenticating blocks of transactions. According to the Ethereum Foundation, a non-profit organization funding the development of Ethereum's ecosystem, the Merge will cut the network's energy usage by 99.95% and set the stage for further improvements to its core infrastructure.

• What will happen to the Ethereum network during the Merge? At the point of the Merge, the difficulty level on Ethereum's PoW network will increase to the point where mining new blocks will no longer be possible.

•  Will the Merge reduce gas fees? Nope. The Merge is a change of consensus mechanism not an expansion of network capacity and thus this will not result in lower gas fees. 

• Will transactions be faster after the Merge? No. There might be some slight changes but transaction speeds will mostly remain the same on Layer 1. 

• Can you withdraw staked ETH once the Merge occurs? No, staking withdrawals are not yet enabled after the Merge. The following Shangai Upgrade will enable staking withdrawals. 

• Will the Merge lead to an explosion in the price of ETH? No, it won't. The merge does not in any technical way affect the market price  of ETH because it focuses more on meeting energy requirement and ESG compliance. 

 How Does The Merge Affect Bitcoin's Image

     Ethereum founder Vitalik Buterin said on Tuesday that the Ethereum Merge is on target to happen around September 13-16. That's when the second largest cryptocurrency in the world by market cap will jettison its energy intensive proof-of-work consensus mechanism. The Merge is only the latest Ethereum blockchain upgrade aimed at creating a reliable decentralized ecosystem for the future of finance. In addition to alleviating energy concerns, the shift to proof of stake brings additional benefits. In proof of stake, block transactions are verified by validators that have staked a number of their tokens. The more tokens an individual has associated with the blockchain, the higher probability they have of being randomly chosen as a network validator. This differs from proof-of-work which is an energy intensive process that relies on computers to solve mathematical algorithms to mine tokens. This rate of energy consumption is a major criticism of proof-of-work, which will remain the basis of Bitcoin mining after Ethereum ditches the process. Beyond the energy crisis and in addition to the recent meltdown of crypto lenders, the crypto industry writ large is facing myriad macroeconomic concerns ranging from political tensions to high inflation rates to hawkish national monetary policies. These macro factors are igniting the recent bear market. 

     Vitalik Buterin expressed his potential concern over Bitcoin's proof-of-work issuance model. He viewed it as a consensus mechanism that consumed massive amounts of energy unnecessarily and that has a negative impact on the environment. He also worries about the constant issuance of a proof-of-work token will affect future validation. Once the issuance of bitcoin tokens stops completely in the year 2140, another problem will arise which is how to secure bitcoin's blockchain. Kyle McDonald, an artist who uses code believes that Bitcoin will soon collapse and that Ethereum will receive long term-adoption among investors. He also believes that after the Merge, only 23% of all volume will be proof-of-work mostly as Bitcoin. As regulators keep looking for opportunities to regulate crypto, proof-of-work will be a prime target. Due to Bitcoin's energy consumption, many worry that it isn't likely to become sustainable any time soon. On the other hand, critics like Denis Porter(Founder of the Satoshi Action Fund) believes that the Merge will make Ethereum obsolete. Ultimately the future of Bitcoin after the Merge is uncertain. The factors to watch out for are regulation, energy concerns and competition.

     So far, we have considered all that The Ethereum Merge Upgrade is about as we anticipate this remarkable event in Ethereum's history. HODL your ETH and let us all hope for the best. Peace