Everything You Need To Know About Ethereum’s Merge

Everything You Need To Know About Ethereum’s Merge

7 minutes to read | 09.02.2022
TL;DR The Merge is a software upgrade for the Ethereum blockchain. This upgrade mainly involves changing Ethereum's consensus method from proof of work to proof of stake. The Merge is important because it is a major step in the full upgrade to Ethereum 2.0, which has many benefits including using less energy, being better for the environment, and increasing the rate of transactions. You don't have to do anything. You can keep your ETH exactly where it is. The Merge is happening behind the scenes and there shouldn't be any downtime. The Merge will probably go smoothly, but watch out for scams. No one is going to be able to upgrade your ETH, so do not send it to them!
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It’s finally here - The Merge. Everyone in crypto has been talking about it. I feel like we’ve been hearing about The Merge and Ethereum 2.0 for years, and well, that’s because we have. But after all this time, and all the memes, the day has come. On September 15th 2022, Ethereum will go through with The Merge. And everyone is hyped about it. So, what is Ethereum’s Merge, why is it happening, is there anything that you have to do, and what could go wrong? Luckily, now we know the Ethereum Merge was successful!

What is Ethereum’s Merge?

Basically, The Merge is a software upgrade for Ethereum. It is Phase 1 in the long awaited process of upgrading Ethereum to Ethereum 2.0. Let’s take a look at the phases of the upgrade to see where The Merge fits in.

Phase 0 - Beacon Chain

Phase 0 happened on December 1st 2020 with the creation of the Beacon Chain. The Beacon Chain is the main blockchain in Ethereum 2.0. Once the upgrade is completed, this is the chain that all of the other “shard chains” (we’ll learn more about those in a minute) communicate with. Currently, it is separate from the Ethereum network. The consensus method of the Beacon Chain is proof-of-stake, which is different from Ethereum’s current consensus method of proof-of-work.

Phase 1 - The Merge

The Merge is Phase 1, and is currently the main focus in the upgrade. This will happen on September 15th 2022 after years of delays, and is the most important upgrade to Ethereum. The Merge upgrade will merge the newly created Beacon Chain with the current Ethereum network. When this happens, the consensus method of Ethereum will transition to proof-of-stake and will no longer be using proof-of-work. After The Merge, users will no longer mine Ethereum, but instead stake their Ethereum holdings in order to earn rewards. Keep in mind that the history of Ethereum will not change. That means every single Ethereum transaction recorded on the current blockchain will still exist after The Merge.

Phase 2 - Shard Chains

Phase 2 is the last phase in the upgrade to Ethereum 2.0. This phase deals with shard chains, which are smaller blockchains that run in parallel to the main Beacon Chain. Shard chains are a lot like Polkadot’s parachains. These chains will handle transactions separate from the main Beacon Chain, but will report these transactions to the Beacon Chain to be validated using the proof-of-stake consensus method. There will be a total of 64 shard chains once the full Ethereum upgrade is complete. After The Merge, the current Ethereum blockchain will become a shard of Ethereum 2.0.

Why Upgrade Ethereum?

There are a few benefits that this upgrade will have on Ethereum.

To Use Proof of Stake

First, the main reason for The Merge is to change the consensus method from proof of work to proof of stake. Proof of work is a consensus method where miners race each other to correctly guess a complex code in order to prove that they used an amount of energy. Once they guess the code, the transactions on the block are validated, the block is added to the blockchain, and the miner is rewarded with cryptocurrency. Proof of work uses an insane amount of energy per transaction because thousands of computers are all using electricity to run while guessing the code. Since only one miner can validate the block, the rest of the miners on the network basically used their computer’s energy for no reason. Because of this, blockchain’s like Ethereum have been criticized for their impact on the environment. Currently, Ethereum is one of these worst cryptocurrencies for the environment. It uses roughly 44,490 GWh per year, which is the same as New Zealand, and uses about 238 kWh per transaction, the same as 8 U.S. households in a single day. Proof of stake doesn’t use as much energy because it doesn’t require any of the validators to use energy in order to solve a code. Instead, validators put up their own tokens as a stake in the network. If you have staked your tokens then you are eligible to be randomly picked to validate a block and receive an award. In proof of stake the security lies in the coins that you put up at collateral. If you are caught doing anything malicious, then your staked tokens are taken from you. Currently, you need 32 ETH (~$50,000) in order to run your own validator.

Increases Rate of Transactions

The Merge itself likely won’t increase the rate of transactions too much. Currently, Ethereum processes around 15 transactions per second, but after shard chains are introduced, it should be able to process tens of thousands of transactions per second. Since there will be 64 separate shard chains, each can process its own transactions. So you can easily send and receive Ethereum before the shards have even communicated with the Beacon Chain. Having shards will also increase the scalability of Ethereum. This will allow for many more developers to not only develop more apps on Ethereum, but create apps that can process many more transactions than apps can currently. Gas fees have become a big complaint of Ethereum. Sadly, during The Merge gas fees are unlikely to go down since during this phase the transaction rate will likely be around the same. Once sharding comes into play, we are likely to see a decrease in gas fees due the the decreased load on each node.

What Do You Have to Do During The Merge?

Many people ask if there is anything they have to do during The Merge. The answer is that you don’t have to do anything because the entire process is going to seamlessly happen in the background with no downtime. You won’t even know it’s happening, though some exchanges may make an announcement, or even pause trading for a few minutes while this happens. Others might be worried that they might lose their ETH. When The Merge happens the entire history of Ethereum will still exist and the blockchain cannot be altered, so you know your funds are safe. If you hold your ETH in a wallet there is absolutely nothing you need to do with it. The funds can stay put in your wallet. Same goes for holding any ETH on an exchange. Wherever it is being held is safe.

Is There Anything That Can Go Wrong During The Merge?

While the developers that build Ethereum are confident that The Merge will go smoothly and there will be no impact on Ethereum, let’s look at some things that could go wrong. According to the Ethereum website, there may be scammers around this time claiming they can upgrade your ETH to ETH 2.0 if you send it to them. Do not fall for this scam. Like stated above, there is nothing that you have to do during this time with your ETH. You don’t have to send it anywhere. It is possible that there could be a fork of Ethereum. A fork is a split into a different blockchain. In this case, there is a group of people who want Ethereum the same as it is now with proof of work. This newly forked blockchain and the newly upgraded Ethereum will have the exact same history creating copies of certain assets like NFTs. This can lead to something called a replay attack. Here a hacker would sell one of the copies of an NFT from the forked chain, but also create the same exact transaction on the new Ethereum chain making it look like they are now the new owner of the NFT. However, due to methods like chaining certain IDs, this is unlikely to happen. Summary The Merge is a software upgrade for Ethereum. The main purpose is to merge the Ethereum network with the new Beacon Chain, which will switch Ethereum from using proof of work to using proof of stake as a consensus method. There are a few benefits to the upgrade, including increasing the rate of transactions, and allowing Ethereum to use far less energy with its new proof of stake consensus method. During Ethereum’s Merge, there is nothing that you have to do. You don’t have to mess with any of the funds in your wallet or on any exchanges. In fact, you probably won’t even know it’s happening. There is most likely nothing that will go wrong during The Merge. The worst things will most likely be the numerous scams going around. Don’t give your ETH to anyone who says they are going to upgrade it.
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