The trending topic in the crypto industry right now is Ethereum’s Merge. We’ve waited a while for this, and it’s exciting to see it coming. We are already in September, so the merge is expected to happen soon this month.
Rumors mention that the merge might occur in one week, but nothing is official. Even though The Merge is set to happen, there are many misconceptions about the network upgrade regarding Ethereum.
Why is this a big deal and affects gas fees for users? There is much to learn, so keep reading and expect to learn many exciting new things.
Table of Contents
What exactly is “The Merge”?
The Merge is called the event's name, where the Ethereum blockchain is shifting from using Proof-of-Work (PoW) to using Proof-of-Stake (POS). They call it the Merge because it’s merging two independent blockchains that are running in parallel. The main Ethereum blockchain is connected with the special-purpose blockchain called “The Beacon Chain.”
The Beacon Chain only launched two years ago, and its primary purpose is to be a Proof-of-Stake blockchain. So there aren’t any transactions on it, any token on the DeFi apps, and it’s an open blockchain that’s meant to be a blockchain running a Proof of Stake consensus mechanism.
The Beacon Chain is also known as the “Empty chain, " allowing it to merge with the Ethereum blockchain and completely replace the PoW. So, from now on, the PoW will shift into a PoS consensus mechanism.
Centralized exchanges will suspend Ethereum transactions and withdrawals
Because of the risks associated with the system upgrade, Binance and Coinbase have decided to suspend Eth and ERC20 withdrawals during the merge in order to avoid any system congestion.
Binance has already suspended withdrawals, and Coinbase is set to do so on September 15, 2022.
So, if you want to buy Ethereum, you need to be well aware that you won’t be able to withdraw them on Binance and Coinbase. Alternatively, you can try purchasing the cryptocurrency on other platforms that still allow withdrawals.
The Beacon Chain
The Beacon Chain is the architecture of Ethereum 2.0. It is a separate blockchain on the Ethereum network and runs in parallel. It’s secured by the PoS consensus algorithms, which still run on PoW.
For a long time, it has worked as a test net for Ethereum 2.0 but is now about to change entirely with the Merge. Many think that they’ll be drastic changes, but the truth is that the most critical considerations include the following:
- The funds are still safe
- You won’t need to mine Ethereum anymore
- History won’t be lost by any chance
Where are Ethereum transactions recorded now?
As of now, every Ethereum transaction and smart contract is recorded under the Mainnet. The Mainnet launched in mid-2015 and is also known as “Layer 1.” The block verification process is similar to Bitcoin since it operates on a PoW consensus mechanism.
So, what does this mean? Miners participate in the blockchain, which provides the computing power (CPU) for updating the loss of blocks and transactions they contain. A primary advantage a PoW has is its high level of security and decentralized performance.
However, let’s not forget that PoW also requires an abnormal amount of electricity since you need to use hardware to support the mining process. Unfortunately, equipment isn’t cheap, which is the downside for miners.
Therefore, The Beacon Protocol is known as the 2nd layer, “Layer 2.” So, the entire idea of the Merge is to eliminate this electricity problem and continue to provide the right amount of security.
Why are people so excited about the Merge?
The Merge is no small event, so it’s considered one of the most powerful and largest events in the crypto world. Why so?
There still hasn’t been a blockchain that has undergone these types of changes yet. Blockchains usually won’t change, so it’s quite a new thing. The cryptocurrency has a total value of around $1,400, significantly dropping since the beginning of the year.
However, Ethereum still has one of the most influential and prominent economic ecosystems in the crypto world. Also, the security level of this economic activity will change from a PoW to a PoS economy.
Of course, it has risks, but that’s why the Merge didn’t happen so quickly. It takes lots of testing and practice to perfection.
Ethereum 2.0
You may have heard about Ethereum 2.0. However, the Ethereum Foundation isn’t giving much notice to this term since it confuses users. Additionally, the foundation is warning users about avoiding any potential scams, including swapping tokens for an “upgrade.”
The Ethereum foundation also mentioned that holders or users of ETH don’t need to do anything with their funds or wallet before the Merge since everything will be regulated by them!
What can you do to prepare for the Merge?
The Merge is one of the biggest events in cryptocurrency history, but its downside is how many people try to scam others. Therefore, it’s important to know that people don’t need to worry about doing anything with their money.
Nevertheless, the Ethereum ecosystem isn’t only about users and holders but has more to it. Here are the most important ones:
- Staking node providers and operators: Some of the most important actions you need to undertake if you are staking nodes is to initially run a consensus layer client along with an execution layer. Therefore, you should authenticate both these layers with a shared JWT secret, so they can secretly communicate.
- Smart contracts: The Merge is introducing structural changes to Ethereum, and many DApp developers are looking forward to it. Many users have long been waiting for this and are excited to see what has come!
- Non-validating node providers and infrastructure operators: Some direct actions are installing a consensus layer client separately from the execution layer. Again, you should authenticate both clients with the shared JWT secret so they can communicate securely.
Will the Merge change the price of ETH?
Most crypto experts are continuously analyzing this, but we’ll have to wait for and see what happens during the period of extreme volatility. However, many experts claim that the price of Ethereum has been going at a smooth rate since the introduction of the Merge. Moreover, since it’ll make Ethereum more energy efficient, this will positively impact its overall value.
The Merge still hasn’t affected the price of Ethereum, but until next week, we’ll be able to confirm what exactly will happen with it. However, even though nothing is entirely sure yet, we believe that the Merge will positively affect Ethereum’s price.
Why is energy consumption becoming a big deal?
As you may have heard in the news lately, energy consumption is becoming a big deal. Cryptocurrencies are primarily responsible for most of the electrical consumption worldwide. With the Merge, Ethereum will cut electric consumption by 99.95%. So, due to this, Ethereum is becoming a game changer and an environmentally friendly financial system.
How does this work? PoS seeks to secure blockchains with capital rather than electric consumption. The amount of energy used is equivalent to the energy you are using to read this article. With the new system enabled, Ethereum is consuming thousands of times less energy than the gaming industry is.
Therefore, many other industries are taking lessons from Ethereum and seeking to make innovations by learning from it!
Will the Merge increase transaction speeds?
A common question asked by many. The volume and costs of transactions offer equivalent dynamics in the crypto network. After the Merge, Ethereum’s block time will get faster, from about 14 seconds to 12 seconds. These stats increase transaction capacities by 12% and will reduce gas costs by the same amount as well.
However, this amount is negligible, so it shouldn’t be considered a huge leap in lowering gas fees.
The final word
We got a chance to learn the most important information regarding the Merge. This is the month the Merge is set to take place, and everyone excited about crypto news is barely waiting for it.
The Merge is set to bring powerful innovations to the crypto world and even reduce the amount of energy dependence it has. This will benefit the environment and help us fight the energy deficiency the world is currently facing.
There is plenty of news to look forward to regarding the Merge, and the most exciting part is that many innovations in the Ethereum blockchain are only days away!
About the author: Tony Ademi is a freelance SEO content and copywriter. He has been in the writing industry for three years and has managed to write hundreds of SEO-optimized articles. Moreover, he has written articles that have ranked #1 on Google. Tony’s primary concern when writing an article is to do extensive research and ensure that the reader is engaged until the end.