|What is the Ethereum Merge, and how does it affect the value of ETH?
According to Ethereum inventor Vitalik Buterin, the ‘Merge’ proof-of-stake upgrade is still scheduled for September 13-15, 2022.
The Merge is still scheduled for September 13-15. The Bellatrix hard fork is taking place today, which *prepares* the chain for the merging. But don’t forget to keep your clients up to date!“ He stated this in a tweet.
According to Ethernodes statistics, as many as 73.3% of Ethereum nodes are now identified as “Merge ready” ahead of the impending Bellatrix update for Ethereum on Tuesday.
What exactly is the Bellatrix upgrade?
The Bellatrix update is one of the final requirements for the official Merge, which will see Ethereum transition to a proof-of-stake consensus mechanism between September 10 and September 20.On September 4, 2022, just before the Bellatrix consensus layer update, FTX stated that it will cease trading ETH and ERC-20 tokens, which are used to build smart contracts on the Ethereum Blockchain. This is done to guarantee that the upgrading goes well and that no user tokens are lost.
The Ethereum network, like Bitcoin, was developed using the proof-of-work (PoW) mechaniBeacon Chain proof-of-stake will soon be integrated with the current Ethereum Mainnet. This will signal the end of Ethereum’s proof-of-work era and the complete shift to proof-of-stake. This creates the foundation for later scalability improvements like sharding. Ethereum’s energy usage will be reduced by 99.95% as a result of the Merge.sm. This means that the Ethereum (ETH) token is created by mining, which consumes a lot of energy.
According to Cointelegraph, the Ethereum Foundation also indicated that if node operators do not install the update prior to the Bellatrix upgrade, Ethereum clients would “sync to the pre-fork blockchain.” Because node operators will be locked on an obsolete, incompatible chain with outdated rules, they will be unable to transmit Ether or use the post-merge Ethereum network.
The Ethereum Foundation states that users of Ethereum do not need to do anything with their ETH and other Ethereum-based assets during the Merge, but they should be wary of frauds that claim otherwise.
What is The Merge?
The Merge signifies the union of Ethereum’s existing execution layer (the Mainnet as we know it today) with its new proof-of-stake consensus layer, the Beacon Chain. It does away with the necessity for energy-intensive mining in favor of securing the network using staked ETH. A really exciting step toward realizing the Ethereum vision is increased scalability, security, and sustainability.
It’s important to keep in mind that the Beacon Chain was initially delivered outside the Mainnet. The Ethereum Mainnet still employs proof-of-work to secure all of its accounts, balances, smart contracts, and blockchain data, whereas the Beacon Chain uses proof-of-stake. When these two systems finally converge and proof-of-stake completely replaces proof-of-work, this is known as the approaching Merge.
How will The Merge help?
The Merge will see Ethereum abandon proof of work, its current energy-intensive method, in favor of proof of stake.
In the crypto world, “staking” is depositing cryptocurrency into a protocol. This is sometimes done to generate interest. The founders of the terraUSD stablecoin, for example, promised users 19% interest on staked TerraUSD: you could put in $10,000 and withdraw $11,900 after a year (until it imploded).Staked cryptocurrency may also assist secure a system, like in the case of a proof-of-stake blockchain. The more ether that is staked, as we will see momentarily, the more secure the blockchain will be after the Merge.
Miners will no longer have to solve cryptographic challenges to validate new blocks once proof of stake is implemented. Instead, they will add ether tokens to a pool. Consider each of these tokens to be a lottery ticket: If your token number is called, you will be given the opportunity to verify the following block and collect the associated prizes.
Will the price of ether rise as a result?
Ether has dropped almost 60% since the beginning of the year, and many are hopeful that the Merge would bring it back up. This has been a fiercely contested issue in crypto circles in recent months, and no one knows for certain how the Merge will affect the price of ether.
There are two main reasons why many believe the price of ether will surge following the Merge. The first is the notion that fractionating Ethereum’s carbon footprint will make it simpler for large corporations to invest in ether and develop Ethereum apps.
The second point raised is a little more technical. Mining Ethereum is expensive; as power bills have risen and crypto prices have fallen, even profitable mining businesses have begun to lose money. Miners often sell the majority of the cryptocurrency they earn from mining to cover costs. As miners sell their ether, this produces millions of dollars in sell pressure each day. Miners will not have to sell all the ether they earn once Ethereum is proof of stake, because validating blocks is substantially cheaper than mining them using proof of work encryption.