Market Update 05/09/2022 - “The Merge Mid-September”
The long-awaited Ethereum 2.0 merger is getting near. Based on Ethereum’s official blog, The Merge is expected to be between 10-20 September 2022. On the other hand, according to a conference call between Ethereum (ETH) devs, core developer Tim Beiko proposed a tentative date of September 19 for the Merge. This will happen after switching the final testnet before the merge to PoS. The adoption of the transition has been delayed on a number of occasions. The crucial shift of the Ethereum network from proof-of-work (PoW) mining consensus to proof-of-stake is almost complete (PoS).
Ethereum Merge: What is it?
The Ethereum Merge presents one of the most significant upgrades on the Ethereum network. The launch of Beacon Chain in December 2020 marked off the Ethereum Merge timeline. However, the Merge has been postponed severally due to unprecedented delays. There are some challenges with the increase of PoW calculations complexity and consequently, increase mining difficulty. Nevertheless, the successful mergers of the Ropsten and Sepolia testnets and the Goerli testnet had given a glimpse of ray towards the Mainet Merge.
Ethereum looks to switch from a Proof-of-Work consensus to a Proof-of-Stake consensus mechanism in an event termed “The Merge”. Thus, the Ethereum after the merge will be called Ethereum 2.0 – n general term used to cover several improvements to the Ethereum network, which tackle some of its most pressing technical limitations.
Vitalik Buterin, Ethereum’s Co-Founder emphasizes that Ethereum must scale to realize its vision of becoming a global decentralized programmable blockchain. The Ethereum Merge seeks to make the network more scalable and energy efficient by up to 99%.
According to the research by FTSE Russell, PoS Ethereum will consume about 2.62 megawatts of energy compared to the existing PoW’s 5.13 gigawatts! Under PoW, the price of ETH and the hashrate are positively correlated which means whenever there’s a price increase, in equilibrium so too does the power consumed by the network. However, under PoS, when the price of ETH increases, the security of the network does too (the value of the ETH at-stake is worth more), but the energy requirements remain unchanged.
The main impact of moving to proof-of-stake is it will make Ethereum more efficient and scalable. It will also help in solving Ethereum’s biggest problem- expensive gas fees (associated with elevated network activity).
Read More on the previous Ropsten Merge, PoW and Pos
So.. as an ETH holder.
As a crypto user, no matter if you are using Ethereum applications on-chain, holding Ether on an exchange, or in a self-custodied wallet, you do not have to do anything. You can rest assured that their stored or staked Ether will be converted from ETH to ETH2 post-merge. ETH will also be under the same ticker symbol- “ETH”.
Do beware, there might be a few scams trying to take advantage of the clueless ETH holder. Therefore, If an application, exchange, or wallet you use offers additional instructions or recommendations, you should verify these are actually coming from them. Always double-check before transferring any cryptocurrency out of your wallet or placing it into any stalking mechanism.
What will happen to ETH Stakers and validators?
Stakers will unable to make any withdrawal for the ETH they staked for about 6-12 months after the merge. In what will be known as the Shanghai upgrade, users will be able to withdraw staked ETH, with a daily withdrawal limit of 40,000 ETH per day (out of ~13 million staked).
Validators on the other hand will be able to receive liquid ETH rewards from network validation. Although they will still be unable to withdraw until the Shanghai upgrade, validators will be issued a unique address that contains their staked ETH and network rewards verified by the Beacon Chain.
The key-takeaways/market update is a new series by AxeHedge, which serves as an initiative to bring compact and informative In/Visible Talks recaps/takeaways on leading brands and investment events happening around the globe.
Do keep an eye out for our posts by subscribing to our channel and social media.
None of the material above or on our website is to be construed as a solicitation, recommendation or offer to buy or sell any security, financial product or instrument. Investors should carefully consider if the security and/or product is suitable for them in view of their entire investment portfolio. All investing involves risks, including the possible loss of money invested, and past performance does not guarantee future performance.