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What is The Merge And All You Need To Know About Transition to Ethereum 2.0

The Merge is one of the hottest topics in the blockchain world right now when Ethereum will shift from proof-of-work consensus mechanism to Beacon Chain proof-of-stake network. We have gathered the latest information about it — when it’s most likely to happen and what will change.

With the rise of decentralized finance and non-fungible tokens, Ethereum ecosystem has gone through major traffic issues and unpredictable transaction fees spikes. Those reasons pushed the founders of Ethereum to move the ecosystem to a Proof of Stake-backed algorithm, Ethereum 2.0.

So when is this much-anticipated event happening, and what will the Ethereum investors gain from it?

What is The Merge?

Currently, Ethereum is operating like Bitcoin or any other major crypto asset. Transactions are mined by a network of computers, which solve complex mathematical puzzles. After completing the puzzle, they are awarded new coins. This proof-of-work mining method is extremely energy-consuming.

However, Ethereum’s event, The Merge, will change how transactions are validated. The event will switch to a consensus mechanism (proof-of-stake), which consumes way less power, helping Ethereum to decrease its energy consumption by 99%.

Since its launch in 2015, the Ethereum community has been working on making less environmental impact, and it seems that the change is coming!

What Should the Investors Know Before The Merge?

Simply put — more efficient mining and scalability solutions will make Ethereum a more attractive platform to build on and invest in.

The Merge will also decrease the total ETH supply and provide investors with an option to stake their ETH. Because of the foreseen yield generated through staking, the market interest in the blockchain will likely increase as every investor will be able to earn passive income by holding Ethereum.

Unlike Bitcoin, which has a max supply of 21 million, Ethereum has no limits on its supply. Over 121M ETH are in circulation as of August 2022. However, there is a yearly supply limit of 18 million ETH per year, 25% of ETH’s initial supply.

According to Ethereum’s website, the issuance will drop to about 0.6 million per year, with a similar 2.7 million ETH burned, meaning 2.1 million ETH burned per year, or -7% a year, ultimately making Ethereum a deflationary asset.

The supply’s decrease will be a positive change to the second largest crypto asset.

However, the Ethereum or ERC-20 token holders should not be worrying. If The Merge is successful, the transition will happen without downtime, and Ethereum will continue to experience its volatility, as usual, going up and down in the market.

Still, Coinbase has informed the Ethereum holders that it might pause the token deposits and withdrawals as a precautionary measure to ensure that there are no errors on their side. This downtime is expected to be short, and holders will not have to perform any updates on their end.

When Is Ethereum’s Merge Happening?

For months, everyone was guessing when The Merge would happen. The rumors were wandering around, saying it would happen sometime this September.

Finally, the Ethereum developers have confirmed that The Merge will likely occur sometime on September 15 or 16, 2022. The exact time and date will be confirmed as we approach the event.

What Is Goerli Testnet Merge?

Goerli is one of the most active Ethereum testnets and the last to transition point to proof-of-stake (PoS) before The Merge.

The testnet merge occurred earlier this week when Terminal Total Difficulty (TTD) hit 10,790,000. TTD is the mining difficulty required to mine the final block in Ethereum system. Once this difficulty level is reached, the next block will be verified by the computers and added through the proof-of-stake consensus network.

Goerli was one of the three main testnet merges with Ropsten and Sepolia that went live back in June and July. These test-environment merges work like playgrounds, allowing developers to spot and troubleshoot bugs before the big event.

During the merges, there were a few hiccups. However, they were nothing major, and according to the Ethereum developers, everything is working according to the plan.

Are There Any Risks Associated With The Merge?

Although Ethereum’s founders and developers are promising a seamless movement from a proof-of-work consensus mechanism to the Beacon Chain proof-of-stake network, investors should know that it’s a major upgrade in an extremely complex Ethereum system.

Unforeseen errors or issues might shut the Ethereum ecosystem down for a short time, or there could be issues with the assets not transferring seamlessly in some exchanges. Chances of any hiccups during The Merge are very small, given the success through Ropsten, Sepoli, and Goerli testnets merges, but they are still not zero.

The Merge will also drastically change the security of the Ethereum ecosystem. In a current proof-of-work system, it’s nearly impossible to cheat the system because it requires a lot of computational power. In a proof-of-stake system, where the Ethereum will be after The Merge, cheating the system would require accumulating a huge amount of ETH.

As the developers claim, proof-of-stake is extremely secure, and it has been used in several other major blockchains like Solana and Avalanche. However, there were some security issues when the hackers targeted investors in the proof-of-stake networks.

And lastly — Ethereum is a decentralized network that distributes the power between the developers and the large community. And most of the community, miners, who aren’t cheerful about Ethereum quitting the mining option, could decide to create an Ethereum fork that keeps mining intact. And knowing that the mining was the process that helped ETH become the second-largest cryptocurrency, there’s a risk of the new fork becoming more popular than the original Ethereum itself, decreasing its scalability and price.

Will Ethereum Price Increase After The Merge?

It’s hard to predict whether the price will increase or drop below the average after The Merge as it depends on many factors.

Some aspects of The Merge indicate that the ETH price will rise. For example, by quitting traditional mining, fewer tokens will be rewarded to the computers running in the network, signifying the total supply of Ethereum will increase slower than before the merge.

The Merge has been planned for quite a long time, and it is a public event, meaning any changes brought by The Merge will be partially responsible for ETH price.

Bottom Line

The Ethereum blockchain has become the spine of decentralized finances and non-fungible tokens. The Merge is something the whole blockchain community has been waiting for almost seven years, and it seems like the shift from proof-of-work consensus mechanism to Beacon Chain proof-of-stake network is finally coming!

Here is a handy list of key takeaways on what you should know about the upcoming Ethereum event:

  • The Merge is the process when Ethereum’s network will change from proof-of-work consensus mechanism to Beacon Chain proof-of-stake network.
  • According to the Ethereum developers, The Merge should happen sometime between September 15 and 16, 2022.
  • The event will make Ethereum more energy-efficient and provide scalability solutions.
  • All three testnets merges (Goerli, Ropsten, and Sepolia) have happened successfully without any major hiccups, indicating that the Merge will be a seamless experience for both the investors and exchanges.

If you want more news about the upcoming Ethereum event and stay updated with the latest crypto and blockchain-related topics, follow us on Twitter and join our Discord and Telegram servers.

Author: The blockbank team
Article Posted in: Articles
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