Ethereum’s long-awaited transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) is upon us as the merge takes place in less than 10 hours. The broader cryptocurrency space has a lot to consider – and here’s what you need to know.
What is Merge?
The Ethereum blockchain will move away from its energy-intensive consensus mechanism PoW as its execution layer merges with the new PoS consensus layer known as the Beacon Chain.
The Beacon Chain went live in December 2020, allowing ecosystem participants to ‘stake’ ETH to deposit or become the network’s new validators, in doing so replacing PoW miners who previously processed transactions, blocks engaged in the work of making and securing. Network.
In its simplest form, the merge will make the Ethereum network use 99% less energy and provide greater scalability, security and stability.
Ethereum’s mainnet (PoW) and beacon chain (PoS) are running together and will eventually merge, hence the name, ushering in a new era for smart contract blockchain networks. As the new consensus mechanism controls the network, Ethereum’s entire transaction history will be carried forward.
Who maintains the network after the merge?
As explained, users who are able to stake a total of 32 ETH are eligible to become personal validators of the Ethereum Beacon Chain. Verifiers are assigned to create blocks at random and validate transactions and blocks created by other validators in the network.
Users can also participate in pools or centralized staking pools by staking small amounts of ETH, which promise a portion of the rewards for validating and maintaining the network. There are a number of staking options to consider for those wishing to participate in the network’s new consensus mechanism.
A recent report by blockchain analytics platform Nansen shows that just over 11% of the total circulating ETH is with 65% liquid and 35% liquid. There are a total of 426,000 validators and about 80,000 depositors, while a small group of entities command a significant portion of the ETH at stake.
ETH, Coinbase, Kraken and Binance account for about 30% of the three major cryptocurrency exchanges. The largest merge staking provider, Lido DAO, accounted for the largest amount of staked ETH with a 31% share, while the fifth non-label group of validators held 23% of the staked ETH.
Could there be forks of the Ethereum blockchain?
As previously reported by Cointelegraph, the merge will see ETH, the native currency of the Ethereum ecosystem, remain the same after Mainnet joins the Beacon Chain. It is worth noting that some PoW miners who previously mined blocks and maintained the execution layer have indicated that they will continue to do so.
The PoS-powered Ethereum blockchain will continue to use ETH after the merge, while another hypothetical PoW Ethereum network, called ETHPOW, may do away with the creation of ETHW tokens.
This is something that is being considered by financial service providers that offer exchange-traded products (ETPs) that are tied to the underlying assets of a given blockchain. If there is demand for investors to invest in forked PoW chains, some companies may consider doing so.
Any existing ETP or funds that are exposed to ETH need not do anything, as ETH will continue to exist as Beacon Chain implements the POS consensus.
do i need to do something?
The average Ethereum user and ETH holder need not worry about losing their funds or making any changes to the preferred wallet prior to the merge. As the entire history of the Ethereum blockchain is in transition – all funds in the wallet are still accessible and secure.
Most importantly – beware of scams. Cointelegraph has compiled a list of the three most prominent ways malicious actors are trying to fall prey to merge events. Fraudulent bet pools, upgrade scams and fake airdrops are being reported. You don’t need to upgrade your wallet or send your ETH to get new tokens.
