Cryptocurrency

Ethereum Merge Closer than Ever! Why it Matters & What to Expect

Ethereum Merge Closer than Ever! Why it Matters & What to Expect

Ethereum, the most popular and largest altcoins by market cap, has been planning a software upgrade for quite some time now. This update would serve to change Ethereum fundamentally and could affect your crypto assets significantly.

Ethereum has been, ever since it was born, the biggest and the most popular smart contract blockchain out there. But with better equipped competitors trying to play catch up and coming dangerously close, Ethereum is transitioning to a less energy-intensive technology to run its blockchain. It has been termed as Ethereum 2.0 or Eth2 but the Ethereum Foundation now calls it the Ethereum Merge.

And this is one of the most anticipated moments in the history of the crypto space as a whole.

Additional Read: How Ethereum Works?

WHAT IS ETHEREUM MERGE?

According to technical definition by the Ethereum Foundation, the Merge represents the joining of the existing execution layer of Ethereum (the Mainnet we use today) 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.

This is being done with the objective of primarily to become more energy sustainable but also at the same time will make it more secure and scalable.

Ethereum Merge has been one of the biggest issues Ethereum has been plagued with. Since it most popular amongst developers building dApps, smart contracts and DeFi protocols – it has been plagues with network congestion and transaction fee issues. Ethereum’s transaction speeds are now much lower than some of its closest competitors and its gas fees have skyrocketed amid the surge in interest in DeFi.

But adjusting the second-largest blockchain from one system to another is an incredibly complex, multi-step process. It’s important that each decision be assessed thoroughly. Therefore, this has been in the works for quite some time and it is yet to be seen when the final version is launched onto the mainnet.

However, this new Ethereum Merge Update is slated to solve a large chunk of those problems and keep the network ahead of its competition and also reward those who have been with them along the journey and staked actual value for the Ethereum 2.0.

ETHEREUM’S GOERLI TESTNET MERGE GOES LIVE!

Goerli was the final testnet merge that was pending to happen and with this out of the way, the actual mainnet Merge is well on its way to be executed, fully transitioning the Ethereum network from PoW to PoS. This resulted in a major rally in prices on the say day, especially with Ethereum, since it coincided with the positive CPI data from the US for the month of July.

Additional Read: Goerli Tesnet Live on Ethereum Blockchain!

Read how Ethereum price rallied after this: Ethereum crosses $1850 post the successful testnet merge

 

ETHEREUM UPDATES TILL DATE

LONDON HARD FORK

5 AUGUST, 2021

ALTAIR UPGRADE

21 OCTOBER, 2021

ARROW GLACIER

9 DECEMBER, 2021

KILN TESTNET MERGE

16 MARCH, 2022

MAINNET SHADOW FORKS

12 APRIL, 2022

SEPOLIA TESTNET MERGE

6 JULY, 2022

TENTH MAINNET SHADOW FORK

27 JULY, 2022

Now, it is well known that updating a blockchain network is hard work, especially when it is a network as big and popular as Ethereum which has so much value staked on top of it. So it is being undertaken in a very staged manner to ensure all bugs from the system are weeded out and the final product, when released out into the world, cannot easily be compromised by bad actors in the ecosystem.

1. ‘London’ Hard Fork – 5 August, 2021

Following the Beacon Chain genesis, the “London” hard fork was largely instrumental in dictating the way miners interact and profit with Ethereum through various improvements such as EIP-1559. Along with a reduction in fees, another drastic change in the financial incentives for miners is the “difficulty bomb” that will force the proof-of-work consensus to stop producing blocks and therefore make it unprofitable to mine. The EIP-3554 included in the London hard fork delayed the time bomb to December 2021. However, this was later extended by several months by the Arrow Glacier network upgrade (see below).

2. Altair Upgrade – 21 October, 2021

As the first scheduled developmental step for the Beacon Chain, the Altair upgrade was a backend upgrade which required node operators to upgrade their clients. Nodes that didn’t undergo any upgrades would risk not being able to participate in the network post-Merge and might pay penalty fees.

3. Arrow Glacier – 9 December, 2021

The Arrow Glacier network upgrade pushed the date of Ethereum’s scheduled “difficulty bomb” back several months. It was the only change in the upgrade.

4. Kiln Testnet Merge – 16 March, 2022

This was a significant milestone for Ethereum as the Klin testnet merge saw the proof-of-work execution layer merging with a proof-of-stake Beacon Chain. The Merge was largely successful except for a few hiccups here and there.

5. Mainnet Shadow Forks – 12 April, 2022

A shadow fork is basically a test run of the Merge on the mainnet. This is done by running the Merge on a very small number of network nodes, simulating a shift from PoW to PoS. Mainnet shadow forks, which simulate the Merge on Ethereum’s high-traffic primary network, test how the Merge would work under the most realistic possible conditions.

6. Sepolia Testnet Merge – 6 July, 2022

Ethereum’s public testnet Sepolia became the second major testnet to implement the long-awaited Merge upgrade. This brought the entire protocol a step closer to changing its consensus mechanism from proof-of-work (P0W) to proof-of-stake (P0S). The upgrade involved ‘merging’ the existing Sepolia PoW chain with the PoS based Beacon Chain. Sepolia is expected to replace the PoW Ropsten testnet for the Ethereum blockchain.

Read more on Sepolia Testnet Merge

7. Tenth Mainnet Shadow Fork – 27 July, 2022

The execution of the tenth mainnet shadow fork went into effect nearly 26 hours before promised date for the same. This is still part of the back-end efforts to weed out any and all bugs out of the new PoS chain that is to be implemented on the Ethereum network before actually replacing the PoW consensus on the mainnet, the tentative date for which has been set on 19 September.

This is essentially a part of a collective effort on Ethereum, which has been undergoing a series of tests, or shadow forks, which copy data from the main network to a test environment network, also called as a testnet.

Read how this move affected ETH’s price action: Ethereum Price Reached Above $1666 after the Announcement of the Shadow Fork

8. Goerli Testnet Successfully Merged – 11 August, 2022

Going forward, the final dates for the subsequent actions on the Ethereum blockchain to complete the transition from PoW to PoS are yet to be released but the sequence may be as follows.

In the list of releases, users expect the arrival of the Bellatrix update in early September that will switch the PoW off and make Ethereum ready for the Merge implementation on 19 September.

WHY IS THE ETHEREUM MERGE HAPPENING?

The Merge is basically a process to move the Ethereum blockchain network from a PoW to a PoS. It is well known that the process is extremely complicated and needs to be monitored even after implementation to quickly catch bugs and resolve them.

WHAT WILL HAPPEN AFFTER THE  MERGE?

After the Merge, there’s another process that will kick in – called Sharding. This is a process which will essentially help prepare the network for Ethereum 2.0’s Shard chains – that will fully rely on a functional PoS network to operate. By spreading the network workload over 64 blockchains, these shard chains will provide additional cheaper layers for apps and rollups to store data. They also enable layer 2 systems to offer low transaction fees while benefiting from the security of the Ethereum mainnet.

So, The Merge is essentially only the first of five steps of the developmental phases on the Ethereum network. The five developmental phases – as named by Ethereum co-founder Vitalik Buterin – are as follows: ‘The Merge,’ ‘The Surge,’ ‘The Verge,’ ‘The Purge,’ and, finally ‘The Splurge.’

Take a look at this twitter thread explaining the entire process.

 

Vitalik Buterin Explains Steps In RoadMap of Ethereum Merge

Vitalik Buterin also expanded on what each of these phases are meant to do in a recent event. In short, Vitalik stated that the ‘Surge’ will be the next phase in the Ethereum Merge process, which will enhance scalability for rollups through the process of ‘sharding’. Sharding is the process to divide a network across multiple nodes called “Shards” to process lots of transactions at once.

The rest of the three goals will be covered in ‘The Verge’, which is the next step in the roadmap after Post Merge and the Surge steps. This step will deploy the Verkle tree data structure alongside the current using hexary Patricia tree.

The fourth phase of the Ethereum Merge is called ‘The Purge’ which will mark stating expiries and delete old extrinsic histories. Following that, the final step will be ‘The Splurge’, which Vitalik referred to as ‘all of the other fun stuff’.

PROS AND CONS OF the MERGE

PROS:

  • Full transition from proof-of-work to proof-of-stake system
  • The Merge will reduce Ethereum’s energy consumption by ~99.95%
  • This sets the stage for future scaling upgrades including sharding

CONS:

There aren’t any cons that are being planned for in an upgrade as significant as this – on the largest smart contract blockchain network in the world. It is expected to bring about a huge set of positive changes to the blockchain that will make it more future-ready and efficient.

The only cons you can consider from this proposition is that it will not solve all the issues that the Ethereum network is currently facing. It will only solve a bunch of them, as mentioned above. However, it will not fix other issues such as the sky-high gas fees, or the scalability issues just yet. Those will require a lot more steps to be implemented.

WILL THE ETHEREUM MERGE CAUSE A RISE IN PRICE?

This is a very dicey question to tackle. Ethereum Merge will open a world of opportunities for those already on the chain, building on it and hence if it sees a rise in participation, there will definitely be a rise in price, but that will take some time. Thus capitalising on short term gains would be extremely tough.

Many experts however believe this could even trigger a 200-500% rally in the Ethereum price going forward, however these are just speculations and actual events might turn out to be very different. And this is just the first step in a very long process of developements.

It is helpful to remember what happened during Cardano’s move to add smart contract capability to its blockchain last year. Speculations around such news can push prices to unsustainably high valuations of tokens but soon after they can come crashing back down. As mentioned earlier, it will only solve some of Ethereum’s problems, but not all of them. There’s a chance the reality of the merge will disappoint, just as Cardano’s smart contracts did.

Additional Read: Ethereum Price Prediction

HOW WILL THE MERGE AFFECT YOUR CRYPTO INVESTMENTS?

Experts seem to believe that the successful implementation of the Merge on the mainnet can result in a major trigger for growth for Ethereum. This is because with this release, Ethereum would now be in direct competition with all the other PoS based blockchain networks – and it already has a head start in terms of TVL and number of developers building on the blockchain.

According to another crypto expert, the rise is value of Ethereum would also be coming out of the fact that the Ethereum Merge would speed up the processing on the chain and offer greater security and scalability and also, result in over 99.95% drop in reduction of Ethereum’s energy consumptions.

Ethereum’s positive momentum is also expected to positively affect other crypto projects building on top of the ETH blockchain, like Polygon (MATIC), Arbitrum and several others like them.

When is the Ethereum Merge Happening?

According to the Data Shared by the founder of ETH News, Evan Van Ness, Ethereum Merge is scheduled for Mid-September 2022. The developer of Ethereum Foundation’s Tim Beiko also discussed about the target date of 19 September, 2022 for the Merge over a conference call held on Etherem Foundation Youtube Channel on 14 July, 2022.

Important Note: Ethereum Merge might get delayed or happen on an earlier date.

Future of Ethereum

With this successful Merge, it will signal the end of proof-of-work for Ethereum and start the era of a more sustainable, eco-friendly Ethereum. This will also set the stage for further scalability upgrades not possible under proof-of-work, bringing Ethereum one step closer to achieving the full scale, security and sustainability outlined in its Ethereum vision.

Now with the technology ready, these upgrades with reconfigure Ethereum to make it more scalable, secure and sustainable – to make life better for existing users and even entice new ones. All of this, while preserving Ethereum’s core value of decentralisation.

FREQUENTLY ASKED QUESTIONS REGARDING ETHEREUM MERGE

What is Ethereum Merge?

The Merge is a process which involves the migration from Ethereum's proof-of-work consensus to proof-of-stake consensus mechanism, thus resulting in over 99.95% reduction in energy consumption by the blockchain network.

Will Ethereum merge increase ETH price?

This is a very dicey question to tackle. Ethereum Merge will open a world of opportunities for those already on the chain, building on it and hence if it sees a rise in participation, there will definitely be a rise in price, but that will take some time. Thus capitalising on short term gains would be extremely tough.

Will Ethereum 2.0 replace Ethereum?

Eventually, yes. But initially, both Ethereum PoW chain and the new PoS chain will exist simultaneously to make the transition from one to the other easy and give some time to developers to migrate effectively.

Is it going to fix Ethereum's gas fees issue?

No. According to the Ethereum Foundation's page, the Merge is a change of consensus mechanism, not an expansion of network capacity, and will not result in lower gas fees.


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