The news of Ethereum Merge has been dominating the crypto industry. The much talked about merge will be happening this month, and Ethereum will transition to a proof-of-stake consensus mechanism. But before we talk more about the Ethereum Merge, let’s take a look at what a consensus mechanism is.
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What is a consensus mechanism?
The consensus mechanism simply refers to the methods used to reach an agreement, trust, and security across a distributed network. In the case of cryptocurrencies, the network is referred to as Blockchain. The two most popular consensus mechanisms in Blockchain and Crypto are proof-of-work (PoW) and proof-of-stake (PoS).
Why the change to proof of stake?
Ethereum presently uses the proof-of-work consensus mechanism like Bitcoin, which is energy intensive due to the use of mining hardware by miners to validate transactions, also securing the network, and in return get rewarded with Ether. This is the native cryptocurrency of the Ethereum Blockchain.
There are many debates by crypto critics on how harmful cryptocurrency mining is to the environment. To be honest, the proof-of-work consensus mechanism is known to be very energy intensive, and the switch to proof-of-stake will eliminate mining instead the Ethereum network will be secured through the staking of ETH or Ether. This means transactions will be validated by ETH Stakers who will in turn get rewarded with Ether for securing the network.
It is believed the change to proof-of-stake will improve the scalability, security, and sustainability of Ethereum to the environment since this consensus mechanism is believed to be low-cost and low-energy consuming.
What exactly is the Ethereum Merge?
Ethereum currently has two chains namely Eth1 and Eth2. Now Eth1, is the current Ethereum chain we are using under the proof-of-work mechanism which can also be referred to as the execution layer handling all transactions.
On the other hand, Eth2 is the new chain of Ethereum under the proof-of-stake consensus mechanism which is referred to as the consensus layer. The Ethereum Merge simply refers to combining these two chains into one chain and thereby successfully switching to the proof-of-stake consensus mechanism.
What should you do as an Ethereum user and holder?
While the Merge is the most important upgrade of Ethereum to date, as a user of the Ethereum Blockchain and holder of ETH you do not need to do anything with the funds in your wallet before and during the Merge. Please do not fall for scams asking you to transfer your funds anywhere or upgrade your wallet to be considered for the Merge.
Although Ethereum will transition from proof-of-work to proof-of-stake, the entire transaction history of Ethereum right from the genesis block will still be intact after the switch. But for Node operators and Decentralized application (DApp) developers, there are a few things you need to do and take note of.
When is the Ethereum Merge?
I know the big question on your mind now is; when is the Ethereum Merge going to take place? The Merge is expected to begin on 15th September 2022.
What next after the Ethereum Merge?
The Merge will signal a successful end to the proof-of-work consensus mechanism for Ethereum and mark the start of proof-of-stake. Although the issue of high gas fees on the Ethereum Network has always been an important area of concern, the much-anticipated merge may not reduce gas fees, since it is mainly a change of consensus mechanism and not an entire upgrade of the network capacity.
Another important point to take note of after The Merge is; that stakers will not be able to withdraw their staked ETH, staking rewards, and newly issued Ether with The Merge. All withdrawals will be enabled after, the Shanghai upgrade. But please note that validators will immediately start being rewarded with ETH for contributing to consensus.
To make you understand this better when transactions are executed on the network, users pay ETH to cover gas fees, which include a percentage of the transaction. This ETH is not newly issued and is immediately available to the validator as a reward for contributing to consensus.
Will there be downtime for the Ethereum Chain?
It’s important to note that the Ethereum Blockchain will not go offline during The Merge. I know you may be having legit concerns in regards to this due to the downtime experienced by other popular blockchains like Solana and Cardano. The Merge will be like fueling a Jet in mid-air. This will be triggered using terminal total difficulty (TTD), blocks will seamlessly go from being built using proof-of-work in one block to being built by proof-of-stake in the next.
On a final note, while you are getting ready for The Merge as an Ethereum user and holder please do not do the following:
- Send your funds anywhere.
- Import your private keys on any website or DApp to upgrade your wallet.
- Buy any new token named Eth2.0 or invest in any Eth2.0 public and private sale.