Short
- Ethereum’s long-awaited move to proof-of-stake — called a “merge” — is finally happening.
- A lot is about to change. But much is going to remain the same.
Ethereum Sickness is here. The long-awaited upgrade to the second largest cryptocurrency by market cap is expected tonight, current estimate,
So, what does this mean for you, the general user or investor? Whether you’re keeping your lifetime savings in assets or just 0.01 ETH, the network moves a . From proof-of-work blockchain to a proof-of-stake One will tear things apart. But what exactly?
For some time there were rumors that this would be an upgrade Ethereum Fast and cheap. But that’s not true—at least not yet, anyway, according to the Ethereum Foundation and someone who spoke to experts. decrypt,
What is merger?
Merge is Ethereum’s much-hyped move proof of stake, Right now, the network of cryptocurrencies uses the same consensus network as Bitcoin: Proof of work. This extremely energy-intensive method A huge amount of electricity is used to keep the network secure (more than the whole country) to process new transactions on the network.
However, the proof of stake is different. Instead of using miners, validators are needed. A validator can be anyone who has at least 32 ETH available to “stake” or pledge to the network. Users can also participate with small amounts of ETH through staking pools or cryptocurrency exchanges. Today is the day Ethereum is making a move towards that consensus mechanism.
This way of working is the solution for Proof of Work Energy Consumption: Ethereum Foundation claims This will make the network more than 99% energy efficient.
but today’s upgrade does not Solve other issues with Ethereum’s throughput and capacity (i.e. how many transactions are processed per second.) that, it is hopedWill come later
Merge Won’t Make Ethereum Faster
Ethereum’s move to a new consensus mechanism would mean a more energy-efficient blockchain, but it doesn’t mean that Ethereum transactions will be faster.
Why? According to the Ethereum Foundation, because moving to proof of stake will only mean that blocks are produced about 10% more often than proof of work.
Fast Ethereum transactions will definitely be nice: Just like buying things online with a credit card, it gives you peace of mind when transactions are done quickly. But with this cryptocurrency network, things are just not going to get that fast.
Merge Coming: Upgrade Your Customers!
• Beacon Chain for Bellatrix upgrade epoch 144896 – scheduled for 11:34:47 am September 6, 2022 UTC
• The TTD value that triggers the merge is 58750000000000000000000, which is expected between 10-20 September 2022MORE: https://t.co/CdW89oSoE6
— Ethereum (@ethereum) August 29, 2022
“While some minor changes exist, transaction speeds will remain mostly the same at Layer 1,” Foundation Told, “This is a fairly insignificant change and is unlikely to be noticed by users.”
Merge Won’t Make Ethereum Transactions Cheaper
Many think that the move to Proof of Stake will reduce Ethereum’s notoriously high gas fees, the costs associated with conducting transactions. It’s not true-though it is expressed hope They will go down with future upgrades.
A lot of applications and cryptocurrencies run on Ethereum’s blockchain. This means that often, to work with such applications (think decentralized exchanges or DeFi lending protocols), you will need some Ethereum – sometimes very of Ethereum – to pay for transactions.
of network notoriously high fees Some have stopped using blockchain altogether, looking to “Ethereum killers” such as Solana, Avalanche, or Tezos to mint NFTs.
But contrary to what you might imagine, this week’s upgrade won’t make it cheap to use Ethereum. “The merge is a change to the consensus mechanism, not an expansion of network capacity, and will not result in a reduction in gas charges,” the foundation said.
Ethereum is moving towards proof of stake, which will make things more energy efficient – more than 99% energy efficient, the foundation says – but not cheap.
“The overall energy consumption will be lower,” said PJ Murphy, CEO of ArtGreen, an Ethereum-based creative DAO that focuses on facilitating investments in CryptoArt. decrypt,
Is it a good idea to bet Ethereum on an exchange?
As a retail investor, you may receive emails from various exchanges asking you to bet your ETH on the exchange. You might already be doing this. But is this a good idea?
Well, it depends who you ask. Ethereum Core Developer Micah Zoltu Explains decrypt off course not. “You shouldn’t stake with an exchange,” he said. “It hurts the network instead of helping, and the return on investment is probably not worth it at this point in time.”
He recommends betting your ETH yourself, by running my own node—which anyone can do from a computer. “It can be done by anyone with a sufficiently good computer, electricity and internet,” he said.
Zoltu continued that this was because Ethereum presented security issues in exchange for a stake. “You are giving your stake to someone else who may decide to attack with that stake,” he said.
Others are not so concerned, and see the benefits for companies like Coinbase or Binance, making it easier for ordinary users to stake ETH and earn rewards passively. “It has been planned for a long time. It should be very intuitive on the big trusted platforms,” said ArtGreen’s Murphy.
So should you be worried about placing a bet on an exchange? Ethereum core developer Dano Ferrin said it depends on how much control you want. “My reasoning is that I am too much of a control freak to take the exchange out of the risk of reducing my stake,” he said.
“They’re probably better at it, but when they make mistakes it will be massive.”
Merge Won’t Make Ethereum Deflationary
With this upgrade, Ethereum’s monetary policy will change. But there is a common misconception that ETH, the native cryptocurrency of the blockchain, will be deflation – that will not happen. Will add steps for proof of stake deflation pressure to cryptocurrency. Why? Because those who secure the network will be rewarded with less cryptocurrency than before.
With proof of work, miners are rewarded with a total amount of ~13,000 Ethereum per day. But when Ethereum takes steps for proof of stake, that number will drop to 90%, the Ethereum Foundation has. Told, So, the total amount of stakeholders will be rewarded with ~1,600 Ethereum per day.
At the same time, a certain amount of ETH paid to the network as transaction fees will be burned – a change that took effect last year through the EIP-1559 upgrade. This combined with a drop in the issuance rate will add deflationary pressure to the cryptocurrency – but it will not automatically make it deflationary. Rather, it will reduce the inflation rate of Ethereum. Over time, it is possible to burn more ETH than ETH issued on an annual basis, but this will not happen with a merger alone.
What does a merger mean for retail investors?
So after all this, what does this mean for anyone holding some Ethereum on the exchange? Or for those lucky investors who have actually used the cryptocurrency to buy something like an NFT?
Well, according to some experts, the merger should not make any difference. “For ordinary users, the merge means mostly nothing,” Ferrin said.
Zoltu agreed. “The merge should be nothing burger if it goes well,” he said.