Crypto

Merger (Ethereum): all about the “merger” and its impact on cryptocurrency

In a few days, there will be changes in the Ethereum blockchain. A major operation that those responsible for the ecosystem called “The Confluence”. But, by the way, why are we talking about “merging” like that? And, above all, what does this mean for all players on the blockchain?

What is a “merger” in the Ethereum blockchain?

The merger is the culmination of a process that began on December 1, 2020 with the launch of “Beacon Chain” as part of the Ethereum 2.0 (Eth2) upgrade project. Basically, the idea was to increase the maximum number of transactions from 15 to potentially several tens of thousands per second.

But from the very beginning, Beacon Chain also has an interesting feature: transactions are no longer verified by the Proof-of-work system based on the resolution of cryptographic problems, but by the Proof-of-stake system (proof of stake or ownership), which is based on a reduced number of validators holding a certain amount of ether.

The merger is the merger of the main Ethereum blockchain, the Proof-of-work based “mainnet” that classic users have known so far, and the Proof-of-stake based “Beacon Chain”. After the merger, it will no longer be possible to “mine” Ehtereum through the Proof-of-work system on the blockchain.

The new consensus system will be the only one that works to protect the entire ecosystem.

What date and time does the merge (Merger) take place?

The merge is a huge update that happens in two phases, the due date of which depends on reaching a certain hash difficulty called total terminal complexity (TTD). The first phase of this major update, codenamed Bellatrix, took place on September 5, 2022.

The final stage, codenamed Paris, is scheduled after reaching a TTD of 58,750,000,000,000,000,000,000, which should happen between September 10 and 20, 2022, according to the Ethereum blog. However, several sites give much more accurate estimates of the date of the last stage.

The brothel.wtf site (it’s not fictitious… but we emphasize that it is quoted by the official Ethereum blog) believes that the update will occur on Thursday, September 15, between 3:56 and 8:16 am. Page 797.io/themege estimates The Merge’s final update at 5:30 am on the same day.

Why does the transition from “Proof-of-work” to “Proof-of-stake” make a difference?

The transition from Proof-of-work to Proof-of-stake is unlikely to be a game changer for most users of the Ethereum blockchain, whether they pay with Ethereum or any other cryptocurrency on the Ethereum blockchain or use smart contracts. The change is more structural in nature – it should allow the Ethereum blockchain and the entire ecosystem to work better and, above all, become environmentally responsible.

The basis of verifying transactions on proofs obtained as a result of cryptographic calculations (Proof-of-work) is an effective and relatively simple way to protect blockchains. But this method encourages many players to become minors, i.e. build “rigs” consisting of many GPUs, in order to try, by performing billions of operations, to get the right to offer a block on the Ethereum blockchain (resulting in rewards in ethers, for example, in the context of ether mining ).

The problem is that when this activity is encouraged, energy consumption rises sharply. Thus, the Ethereum blockchain currently consumes, according to Ethereum.org, about 112 terawatt-hours per year. This is roughly equivalent to electricity consumption in the Netherlands (17.53 million inhabitants). According to Ethereum project managers, the transition to Proof-of-stake should reduce this energy impact by 95.99%.

Who are the new “miners” after the merger and how to become an “Ethereum 2.0 validator”?

Before continuing, a very important point needs to be emphasized. If after The Merge it is no longer possible to create a node on the Ethereum blockchain to verify transactions using the Proof-of-work system, it will remain possible to freely create other types of nodes. For example, users are encouraged to download a copy of the blockchain to their computer, which also helps secure the entire ecosystem (but won’t make you any money).

Otherwise, those who want to continue generating money by validating transactions on the Ethereum blockchain will have to become “validators.” But there are conditions: first, you must own at least 32 ETH (at the time of writing, this is approximately €54,110) and transfer them to the Ethereum blockchain deposit contract – an irreversible operation.

You should then have a computer with the following minimum requirements:

  • Linux, macOS or Windows
  • At least 500 GB of free space (1 TB recommended due to scalable blockchain size)
  • Recent CPU and enough RAM (data sheet depends on your staking and the number of transactions you are likely to process)
  • Very high speed internet connection (24/7)

The validator software must be installed on this machine. The validation itself remains automated, although it now requires much less resources and energy.

Do I need to do something if I hold Ethereum or another cryptocurrency on the Ethereum blockchain?

Ethereum officials are formal: “there is no need to do anything to protect your funds during the merge”. No action required. For ordinary users, The Merge does not change anything in blockchain wallets, payments, and other transactions.

In fact, as we told you above, we are in a transitional phase of validations, but the very essence of the fact that your crypto assets are on the blockchain does not change, which means there is no need to somehow “update” what you have on the blockchain. deposit. in your wallet.

You can use everything as you are used to, without performing any special actions.

Are we at risk for more post-merger fraud?

Yes, and therefore we will have to be very careful. Because we re-emphasize that if you hold Ethereum or any other cryptocurrency on the blockchain, there is absolutely no action to “secure” or “convert” your crypto assets. They remain as valid as ever.

But attackers claiming otherwise will be plentiful during the transition. Therefore, it is extremely important not to make any transaction or action in connection with the transition and not to give in to any alarm messages received by email, SMS, WhatsApp or taken from a sponsored result after a Google search.

Also beware of fake clients: hackers are currently buying sponsored results to draw attention to malicious sites that impersonate legitimate players such as metamask.

What does the merger change for other cryptocurrencies?

At the moment, the impact of The Merge on other cryptocurrencies is more of a hope. Indeed, competing blockchains like bitcoin are still tied to the more power-hungry Proof-of-work system. But in the long run, this could cost them a place in many investors’ portfolios.

A few large companies such as Tesla or many insurance and financial players are indeed signaling that they are ready to accept cryptocurrencies, whether for payments, smart contracts or solely for investment purposes.

But as we stand on the cusp of a climate catastrophe, the consumption of blockchains is shocking and generally prevents blockchains from being adopted by as many participants as they should be.

As the first major blockchain on the podium of the most important Proof-of-stake cryptocurrencies, Ethereum sets itself apart from competing blockchains. Especially since Ethereum has already demonstrated its usefulness beyond speculation with many advanced features such as smart contracts.

As a result, many investors believe that the capitalization of ether, the main blockchain cryptocurrency, will soon surpass the capitalization of bitcoin. Currently, Ethereum has a capitalization of around 205 billion euros versus around 399 billion euros for bitcoin.

If that happens, and Ethereum does get much greener, most competitors should end up emulating the blockchain by moving to Proof-of-stake as quickly as possible. By becoming more attractive, the Ethereum blockchain can increase its appeal to the creators of new cryptocurrencies.

Conclusion: what to think about this huge merger on the Ethereum blockchain?

On paper, Ethereum blockchain officials are certainly moving forward with this transition. But for now, it remains to be seen how the ecosystem will behave after the transition to a new validation system. One fear is that the problems will increase transaction costs (gas fees) to several thousand euros, as has sometimes happened in the past.

We are also interested in how much The Merge will actually increase the number of transactions per second. Moreover, an update is planned for 2023, which should implement the so-called “sharding” technology associated with this task. We also hope this change doesn’t cause (too many) bugs.

Finally, we can’t wait to see the actual power consumption of the Ethereum blockchain after the merger to see if the reduction in power consumption is indeed on the order of 95%.

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