Cryptocurrency

Ethereum Merge: Everything You Need to KNOW! [September 2022]

Ethereum Merge

Introduction

On 6 September, 2022 – the Bellatrix Upgrade on Ethereum’s Beacon Chain finally went live. The Bellatrix upgrade marks the last upgrade ahead of the final Ethereum Merge, which will fully transition the second largest crypto by market cap – from proof-of-work consensus mechanism to a proof-of-stake mechanism. This is a very important and crucial thing that everybody in the crypto space is looking at right now, be it a participant or just an enthusiast. This is the largest overhaul the crypto space has ever seen and its success would pave the path for further innovation going into the future.

And with the Bellatrix Upgrade live on the Beacon Chain, we now expect the final Ethereum Merge date to be between 13-16th September, which is also being called the Paris Upgrade. Calculating on the basis of the designated block height and terminal total difficulty (TTD), we can expect the Paris Upgrade, or the final Ethereum Merge to tentatively occur on 15th September, 6 am IST.

Source: Ethereum Foundation

Ethereum Merge Explained

According to definition by the Ethereum Foundation themselves, ‘the Merge represents the joining of the existing execution layer of Ethereum (the Mainnet we use today) with its new proof-of-stake consensus layer, the Beacon Chain. It eliminates the need for energy-intensive mining and instead secures the network using staked ETH’.

The main objective behind this mammoth task is primarily to become energy sustainable but also at the same time, make the blockchain more secure and scalable in the future.

Top Ethereum Merge FAQs and Common Misconceptions Decoded

Ethereum Merge Questions for Beginners

What is Ethereum?

Ethereum is regarding as the second generation of cryptos, after Bitcoin and it is a decentralised, open-source blockchain network with the distinguishing feature of having smart contract functionalities. It was practically the first blockchain network with the smart contract facility. Ethereum was conceived by a Canadian programmer named Vitalik Buterin back in 2013 and was launched back in July 2015. Ethereum is also the second top crypto by market capitalisation and hence is also commonly referred to as the altcoin king.

In context of the Merge, Ethereum is currently a blockchain network that works on the proof-of-work consensus mechanism, where ‘miners’ compete against each other using the computing power in their hands to solve a complex mathematical problem and be the first one to verify a set of transactions and add it as a block to the blockchain. However, that is set to change in less than 10 days, as in one of the largest overhauls efforts in the crypto space – the Ethereum network is moving from a PoW based consensus mechanism to a proof-of-stake mechanism – which is called Ethereum Merge.

According to official definition, a consensus mechanism is a fault-tolerant mechanism that is used in blockchain networks to achieve the necessary agreement on data values among distributed processes or multi-agent system. It is basically how records can be kept of events and data in a decentralised manner, as is necessary with cryptos.

Deep Dive into: What is Ethereum & How it Works?

What is proof-of-stake?

Proof-of-stake (PoS) is a type of consensus mechanism that is used to validate transactions happening over the blockchain network. As blockchain systems lack centralised authority governing the system – PoS is one of the methods used to ensure that all the transaction data saved on the network is valid.

The only place PoS differs from PoW is in PoS, there is a mechanism which chooses which participants on the network get to handle this task – which has a lucrative benefit to it too. Those who get chosen to complete the transaction – they get rewarded with a newly mined crypto if they accurately validate the new data and don’t cheat the system.

How is proof-of-stake (PoS) better than proof-of-work (PoW)?

Let’s draw a comparison: proof-of-stake vs proof-of-work. Essentially PoW, which is one of the most prominent and well known consensus mechanisms, is a very energy intensive process. It involves a competition between ‘miners’ who pitch their computing and processing powers to solve a complex mathematical problem to get the chance to verify the next transaction and add it to the blockchain to earn mining rewards.

On the other hand, proof-of-stake is a consensus mechanism which involves a automated staking protocol choosing a validator from a large list of validators who have staked a certain amount of their tokens to the network. PoS is better than PoW because it cuts out the unnecessary excessive consumption of energy parallely all across the network, because the choosing is done randomly and there is no competition. In Ethereum’s case, shifting from PoW to PoS would reduce their energy consumption as a whole by 99.95%, according to the Ethereum Foundation.

What is Ethereum’s Beacon Chain?

Ethereum’s Beacon Chain, which was launched back in December 2020, is the proof-of-stake based consensus mechanism that ran independently since its launch so far. But with the Ethereum Merge, it is set to be ‘merged’ onto the Ethereum mainnet, replacing the old PoW based consensus mechanism in the Paris upgrade.

According to Vitalik Buterin himself, this Paris upgrade is set to take effect sometime between 13-16th of September, 2022.

Additional Read: How will Ethereum Proof of Stake work?

What is a Testnet? 

In the world of blockchain technology, a testnet is nothing but a instance of the original blockchain network powered by the same or newer version of the underlying software. It is typically built to be used for testing and experimentation without risking real funds of network participants or the main chain (also called mainnet).

What is Ethereum testnet?

Ethereum currently has about three testnets which are currently in use and all three of them behave similarly to the mainnet or the main Ethereum network, where you have your real ETH tokens. Developers use these testnets sort of as a sandbox to experiment their dApps on, see how they function and check for vulnerabilities before actually running them on the main Ethereum network.

There are three major testnets that runs on with the Ethereum mainnet.

  • Ropsten: This is a proof-of-work blockchain that most closely resembles the Ethereum mainnet and you can easily mine faux-ETH on this testnet and mimic real world ops in a sandbox environment.
  • Kovan: This is a proof-of-authority blockchain that was launched by the Parity team. Here, faux-ETH can’t be mined, rather it has to be requested.
  • Rinkeby: Similar to Kovan, this is also a proof-of-authority blockchain that was launched by the Geth team. Here also, faux-ETH can’t be mined, rather it has to be requested.

What is Ethereum 2.0?

Ethereum 2.0 is essentially a long-term, multi-phased network upgrade that the existing Ethereum Network is set to undergo, the first of which is the Ethereum Merge. This upgrade is being done with the objective to improve the Ethereum network scalability and security through several changes to the network’s infrastructure—most notably, the first is the switch from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) model.

What are the benefits of Ethereum Merge

The most primary benefit of the Ethereum Merge taking place in the second largest blockchain network by market capitalisation is that, if successfully implemented, this move would instantly turn this behemoth of a network into a very energy efficient one. The Ethereum Merge, as mentioned above, is the first step in a long-term plan to make the Ethereum network more energy efficient, improve scalability and security going into the future.

The Merge is basically the transitioning of the entire Ethereum network from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) one. According to the Ethereum Foundation, this step alone would make Ethereum 99.95% more energy efficient than it is today, thanks to the way PoS works.

Secondly, the Merge paves the way for the future of the network to improve its scalability, via a process called Sharding, explained in detail below.

When is the Ethereum Merge Release Date?

With the Bellatrix upgrade going live on 6 September, 2022, around 5pm, according to Ethereum co-founder Vitalik Buterin’s tweet from that day, the Ethereum Merge is expected to happen between 13-16th of September. However, a calculation based on the designated block height and the total terminal difficulty suggests that the actual Ethereum Merge may happen on the 15th of September, approximately at 6 am, IST.

What is Sharding

Officially the next step in the Ethereum 2.0 plan, sharding is essentially a multi-phase process to improve Ethereum scalability and capacity in the future. In a world where blockchain like Solana and Cardano exist, which output transaction speeds in the hundreds and thousands, at a fraction of the cost of what Ethereum does – this is a highly essential step.

Sharding also provides for distribution of data storage requirements, enabling rollups to be cheaper and making nodes far more easier to operate. It also will enable layer 2 solutions built on the Ethereum network to offer even lower transaction fees while leveraging the security of Ethereum. Sharding is expected to happen right after the Merge of the Ethereum Mainnet with the Beacon Chain.

Will Ethereum 2.0 replace Ethereum 

Ethereum 2.0 isn’t exactly a replacement for the Ethereum we know today, but rather it is a systemic upgrade within the blockchain network. The execution layer of the current Ethereum network will remain exactly the same while only the consensus layer will be transitioned from PoW to PoS, also called as Beacon Chain.

According to the official Ethereum Foundation blog, the terms Eth1 and Eth2 are being phased out and Eth 1 will now be addressed as the “execution layer” while Eth2 will be known as the “consensus layer”.

What is Beacon Chain?

Beacon Chain is nothing but a proof-of-stake consensus layer that was built and launched back in December 2020, and has been running separate of the Ethereum Mainnet so far. However, the Ethereum Merge will effectively replace Ethereum existing PoW based consensus layer with the PoS based consensus mechanism, also known as the Beacon Chain.

Will Ethereum Merge Lower Gas Fees? 

Ethereum Gas Fees prices might not be impacted directly as the merge will not increase the network capacity to process more transactions.  According to the Ethereum Foundation’s page, the Merge is a change of consensus mechanism (PoW to PoS) and is focused on is concentrated on enhancing the throughput of the network with Sharding as a roll up technology.

To read more check out:

Ethereum Merge Misconceptions

Ethereum Price Prediction Weekly

Ethereum vs Ethereum Classic

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