The step towards the Ethereum Merge has officially begun with the start of the Bellatrix upgrade, and it is slated to complete on September 15. Here’s what we can expect to see during the Merge.
The first step towards the Ethereum Merge officially began today at 11:34:47 UTC with the Bellatrix upgrade, and the upgrade is expected to be completed around September 15. But what exactly is the Ethereum Merge, and why is there so much hype around it?
The Merge is a significant step in moving the consensus mechanism of the Ethereum network from Proof-of-Work (PoW) to Proof-of-Stake (PoS). This is achieved by joining the existing Ethereum execution layer with its proof-of-stake consensus layer, the Beacon Chain. The Beacon Chain was introduced in 2020 and allowed users to stake Ethereum tokens (ETH) to secure the network while developers prepare for the eventual transition.
Why is there a need to transition Ethereum to a Proof-of-Stake mechanism? The idea had actually been raised as far back as Ethereum’s conception in 2015. Due to a fast-growing complex ecosystem, Ethereum needed to increase its scalability to increase network efficiency without being clogged up. Doing so on a Proof-of-Work consensus would mean increasing the number of mining machines which uses more power, and more running nodes with increasing disk space. The physical limits of both points mean it is hard to scale the system which leads to network congestion and high transaction fees.
To create a scalable system that is both secure and decentralised, as well as one that is environmentally sustainable in its energy usage, Ethereum decided that a Proof-of-Stake consensus is the next best solution and has been working towards its implementation in the last few years. Hence the reason why the Merge is crucial for the Ethereum community and crypto space in general.
Now that the clock has started ticking towards the Ethereum Merge, what can we expect in the next few days? Here are some of our predictions.
More nodes will become Merge-ready
According to the Merge tracker on Etherenodes, 73.4% of all Ethereum nodes are currently ready for the Bellatrix upgrade at the time of writing. To be considered ready for the upgrade, node operators have to download their client releases from the Ethereum Foundation blog and upgrade their consensus and execution layer.
Investors will be looking out for hiccups during the Merge
While developers and node operators work on the transition to a PoS, investors will be keeping their pulse on the news for any signs of trouble during the Ethereum Merge. Prior to the launch of the Bellatrix upgrades, there have been occasional issues during the development.
One of them was the regression issue with Go Ethereum’s v1.10.22 release, which was discovered by Ethereum software developer Péter Szilágyi and was corrected soon after.
Aaand our latest release is borked. 😕 Geth 1.10.22 contains a regression that causes the trie/state to go bad. Most probably it's one of the PRs we've merged towards the new storage model / online pruner. Trying to find and fix the issue.
— Péter Szilágyi (karalabe.eth) (@peter_szilagyi) August 23, 2022
In early August, Ethereum Foundation researcher Alex Stokes also raised concerns over a possible MEV-boost failure. An MEV-boost acts as a middleman that allow validators to request blocks, and they can select the most profitable block after the block builders collate the transactions. A glitch of the MEV-boost would disrupt the PoS chain and cause a cascade of events that prevent block production, although Stokes mentioned the chances of failure is very low.
If the Ethereum Merge goes off without a hitch, the best-case scenario could be a bullish boost to the ETH price and its related projects on the Ethereum chain. But any hiccups or trouble with the Merge and we could see an outflow of assets from Ethereum to its current competitors such as Polkadot, Solana, and Avalanche.
Ethereum Classic’s hashrate will continue to increase as miners move to ETC
Since the Ethereum Merge will discontinue mining activities on-chain with the move from PoW to PoS, Ethereum mining companies will hop onto the Ethereum Classic (ETC) chain instead to continue mining activities. At the time of writing, the hashrate of ETC has increased to 47.78 TH/s, which is a 64% increase compared to its hashrate of 29.06 TH/s a month ago.
Ethereum Classic is the original Ethereum chain while the current Ethereum (ETH) was a hard fork after the infamous hack of The DAO in 2016, which was a smart contract operating on the Ethereum blockchain. The current Ethereum chain was forked to roll back the chain and essentially ‘refund’ those who lost their assets to the hack, while ETC proponents wanted to retain the aftermath of the hack as they believe blockchain records are immutable and should not be changed at will.
Since ETC still uses a PoW consensus with no plans to change it in the future, Ethereum miners will most likely start mining on the ETC chain instead.
The Total Value Locked on ETC will continue to increase
Other than the increased hashrate, the Total Value Locked (TVL) on the Ethereum Classic chain will also increase. A look at the TVL shows that there is currently USD $829k worth of assets on the chain at the time of writing.
While it is nowhere near Ethereum’s TVL of USD$34.57 billion, the TVL on Ethereum Classic has ballooned by 9.3x since the start of July with most of the assets locked on the decentralised exchange HebeSwap.
There will be a push for another Ethereum forked chain
As the Ethereum Merge approached, several projects looking to fork the current version of Ethereum had appeared in the crypto space.
One such effort has been launched by investor and former miner Chandler Guo to create a forked proof-of-work blockchain called ETHW, and which has been publicly supported by the founder of the Tron network, Justin Sun. Mining software and services provider Luxor Technology, has also assembled an advocacy group to call for a PoW Ethereum as well.
Retail investors will be hit with phishing scams
It’s no secret that the cryptocurrency space is routinely hit by scams trying to take advantage of trending events, and the Merge is no different. The Ethereum Foundation has even put out a statement in their upgrade announcements to warn ETH holders to watch out for potential scams.
As a retail investor you do not need to take any action with regards to your wallet or assets, regardless of whether it’s stored on a non-custodial wallet or centralised exchange. Be on the lookout for emails and social media direct messages that pressure you to give up your passwords or seed phrases, and be alert for fake token airdrops claiming to be the actual ‘ETH2’ tokens. These airdrop scams or email phishing links usually lure users to connect their wallets to a suspicious site which can drain your wallet assets.
The date of the Shanghai upgrade after the Merge
After the move to PoS with the Ethereum Merge, the date for the Shanghai upgrade may be officially announced by the Ethereum Foundation.
What is the Shanghai upgrade? According to Ethereum Developer Tim Beiko, the Shanghai upgrade consists of the EVM Object Format which separates code and data, allowing staked ETH withdrawals, and reducing fees on Layer-2 protocols.
After the Merge, this next upgrade is expected to be another milestone as it allow users to withdraw their staked ETH tokens and experience lower transaction fees.
Regardless of the speculated outcome, the Ethereum Merge is well on its way and the crypto community is definitely watching its progress unfold with bated breath.
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