The Ethereum community is more happy than usual. Developers working on the Ether ecosystem have been rejoicing and chanting as they get closer to the “merge,” which is being hyped as the most significant technical update in the history of cryptocurrency.
But what is the “merge” all about? Cryptocurrency enthusiasts are probably aware of it since it symbolizes a transition to a new consensus mechanism known as “proof of stake.”
We’ve made a detailed summary of the merge, which is set to happen in the middle of September, and the problems that have come up around it. Here is all the information you need.
What Exactly Is the Merge?
Ethereum 2.0, ETH 2.0, Eth2. Although it has gone by various names before, the Ethereum community finally settled on “merge” early this year.
The merge is, in the simplest terms, an update to Ethereum that has been in the works for quite some time and is intended to make the network better. This is not the first time a network has been updated, but it is the most important one, and if it works, developers will be able to add a lot of new features.
The present Ethereum mainnet (the public blockchain that everyone uses) will be combined with a new blockchain known as the Beacon Chain in this merge. Both chains are currently running in parallel. Transactions are only being processed on Ethereum’s mainnet at this time, which uses a mechanism known as “proof of work.”
Once the merge is successful, the Ethereum mainnet will switch from using proof of work to using the proof of stake process used by the Beacon Chain.
What Does This Mean for Investors?
The Ethereum merge won’t instantly speed up the network or cut transaction costs, but investors may benefit from it in the future.
Investors use ether, Ethereum’s native cryptocurrency, to make transactions on the network. The value of ether could change if faster transactions and lower costs lead to more users in the long run.
According to Vladimir Gorbunov, CEO and creator of the MetaFi network Choise.com, the quantity of ether should decrease as investor interest rises. To top it all off, if the ether supply starts to drop, it might mean a rise in ether value for those that bought in early.
According to Coin Metrics, the price of one ether is at $1,600 as of September 14, 2022, down from its all-time high of over $4,892 in November of the previous year.
Side Effects of The Upcoming Merge
The forthcoming Ethereum Merge comes with some risks, as it is the largest update to any blockchain network.
• Denial-of-Service Vulnerability
The switch to PoS will expose network proposers to a DoS attack. Although developers are working on ways to make the selection process anonymous, it’s still a risk right now.
• Centralization of Staked Ether
Most investors don’t have 32 ether to stake but may join a group to gather the cash needed to become a validator.
This could make validator nodes more dependent on centralized institutions, making censorship or a government takeover more likely.
• Scams
Many cryptocurrency programs now refer to this merged and improved network as “ETH 2.” This uncertainty concerning ETH 2 renders ETH holders vulnerable to fraud. Scammers may capitalize on this confusion to get people to trade their ETH for “ETH 2,” but they’d be stealing their Ether.
• Ether price drop
If the merge fails, Ether and other cryptocurrencies that utilize Ethereum’s blockchain might drop in price.
In What Ways Will This Affect the Environment?
As earlier said, the merge is likely to improve the blockchain’s energy efficiency.
According to its website, Ethereum now generates the same amount of carbon dioxide emissions as Singapore and uses the same amount of energy as the Netherlands.
Since the merge is expected to cut Ethereum’s carbon footprint by more than 99%, it may become more attractive to investors who care about the environment.
Is it Possible for the Merge to Fail?
The transition from POW to POS in Ethereum is the first of its type. If the Merge is successful, it will be an incredible demonstration of human creativity and cooperation.
There is a high risk of losing hundreds of billions of dollars if it crashes (the market cap of ether is near $200 billion, plus many other valuable tokens are constructed on top of the blockchain network).
After completing more than a dozen tests and merge simulations, the project’s main developers and key stakeholders are ready to go ahead. The Merge might still fail, but it’s improbable.
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