It is the final countdown!!!

The Ethereum Merge is the biggest news in the crypto space right now. Everyone is talking about it, even Google is counting down to “The Merge” with a Doodle.

Ethereum is set for this upgrade – one of the biggest upgrades in the industry. It can change everything.

So, what is this Merge, and what will it do? Does this mean you have to move your ETH? Will the price of Ethereum increase?

In this piece, I’ll explain what the Merge is and how it is expected to affect the Ethereum network.

What is the Ethereum Merge?

Think of it as the next-generation version of Ethereum. Ethereum Foundation itself explains the whole process with this analogy:

“Imagine Ethereum is a spaceship that isn’t quite ready for an interstellar voyage. The community has built a new engine and a hardened hull with the Beacon Chain.

 

After significant testing, it’s almost time to hot-swap the new engine for the old mid-flight. This will merge the new, more efficient engine into the existing ship, ready to put in some serious light years and take on the universe.”

The upgrade will migrate the network from its Proof-of-Work (PoW) Consensus Model to a Proof-of-Stake (PoS) Model. (I’ll explain all about PoW and PoS soon).

This will make the Blockchain 99% more energy efficient and drastically reduce its carbon footprint. It will also prepare the Ethereum Blockchain for future upgrades designed to make the Blockchain scalable and faster.

The Merge is set to happen via two steps: Bellatrix and Paris. Bellatrix is the network upgrade on the network consensus, which already happened on the 6th of September.

The next step, Paris, is the network transition from Proof-of-Work to Proof-of-Stake. This step will be triggered when the Total Difficulty Threshold reaches TTD (Terminal Total Difficulty), which is some hours from now.

Before we continue, let’s talk about Proof-of-Work and Proof-Stake and how they work. So, you can understand what is going on better.

Proof-of-Work Vs. Proof-of-Stake

Proof-of-Work and Proof-of-Stake are consensus mechanisms to verify transactions and add new blocks to Blockchains.

Blockchains use them to agree on things like the order of transactions, preventing users from double-spending. Each transaction can only have a single hash/nonce that will validate the transaction and create a new block. (To properly understand this process, you have to understand how a Blockchain works).

Proof-of-work involves computers racing to solve complex computational problems, find this hash/nonce, and validate transactions. That process is called “mining,” and each participating computer is a “miner.”

It is similar to regular mining; however, you’re digging online for cryptocurrencies this time. The miner who first solves the complex problem and finds the nonce/hash is rewarded with a new crypto token (think of this as hitting gold!).

It is called proof-of-work because you use real-world assets to confirm blocks and are rewarded with units of cryptocurrencies. In reality, PoW requires enormous amounts of electricity and computer power.

On the other hand, Proof-of-Stake (PoS) doesn’t have miners; it involves validators or stackers. Instead of competing with powerful hardware, the validators or stakers contribute their capital (the crypto assets) in exchange for a chance to validate new transactions.

You can think of the PoS as a less energy-intensive consensus model. It also reduces the risk of centralization by miners with more resources.

What will the Ethereum Merge do?

According to the Ethereum Foundation:

“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.”

The current Genesis (Proof-of-Work) Layer is the Ethereum blockchain we know – it contains all transactions that have happened since July 2015. Genesis requires miners to validate each transaction through an energy-intensive process (Proof-of-Work).

The problem is that this process consumes a lot of power and produces tons of carbon emissions.

Currently, Ethereum consumes up to 112TWh/yr worth of power, comparable to the yearly energy consumption of the Netherlands. The carbon footprint is at 53 MT/yr, similar to the carbon footprint of Hong Kong.

The Energy Consumption and Carbon Footprint of Ethereum from Digiconomist

The process is energy-intensive and expensive, requiring miners to have sophisticated and costly hardware because of the competition.

By moving to a Proof-of-stake consensus, the Ethereum network eliminates energy-intensive mining. The Beacon Chain, a Proof-of-Stake layer, will replace Genesis and switch out miners for validators.

Estimation suggests that after the Merge, the Ethereum network will reduce its energy consumption by 99.95%, reducing the energy consumption to 0.01TWh/yr.

A Representation of the Merge from Ethereum.org

What is the Beacon Chain?

The Beacon Chain is the Proof-of-Stake layer or consensus “layer” on Ethereum. It has been running since November 2022 as a separate chain alongside the Ethereum Mainnet. The Beacon Chain uses validators instead of miners to validate transactions and form new blocks.

In practice, you stake some ETH coins to activate the validator software and run the node software to become a validator. The node software processes new transactions and creates new blocks on the Blockchain. In turn, you get a percentage of the gas fee after validating transactions with your staked coins.

The Merge will combine the Beacon chain with the existing execution layer, making it the new consensus engine. It will also signify the end of proof-of-work on the network.

When will the Merge Happen?

The Merge is happening soon – in just a few hours. The step is set to start when the Total Difficulty Threshold reaches TTD (Terminal Total Difficulty), which is some hours from now.

Countdown to The Merge on Google at Time of Writing

What will Happen After the Merge?

Validators will perform the same functions as Miners. But now, instead of competing with powerful hardware and energy consumptions, validators stake their ETH as collateral. According to Ethereum itself:

The Merge represents the official switch to using the Beacon Chain as the engine of block production. Mining will no longer be the means of producing valid blocks.

 

Instead, the proof-of-stake validators assume this role and will be responsible for processing the validity of all transactions and proposing blocks.”

Here is a quick breakdown of what will happen after the Merge:

• The Beacon Chain proof of stake system merges with the Ethereum Mainnet.
• The end of Proof-of-work on the Ethereum network
• It will reduce Ethereum energy consumption by 99.5%
• It prepares the Ethereum Blockchain for the next set of upgrades

Are there Further Upgrades to Follow the Merge?

Yes. The Merge is Phase 1 of major upgrades coming to the Ethereum Blockchain in the coming years. These upgrades are expected to tackle the Blockchain’s scalability problem. The Upgrades are divided into 3 phases:

• The Beacon Chain (Phase 0)
• The Merge
• Sharding

The upgrades are commonly referred to as The Merge, The Surge, The Verge, The Purge, and The Splurge.

After all these upgrades, the Ethereum network is expected to become more secure, scalable, and sustainable. Scalability and security mean the network can better support Metaverse and Web 3.

How will the Merge affect Ethereum Price?

The Ethereum Foundation has clarified that the Merge will not directly impact Ethereum price.

But there are several speculations about how the upgrade will affect the Ethereum price. You should expect the market price of Ethereum to react to the news.

So, several traders, including Arthur Hayes, are bullish and expect the price to increase after the Merge. Arthur Hayes is the CEO of BitMex, a Crypto Trading Platform. He predicts that Ethereum should hit $3000 by December.

FAQs about the Merge

Will the Merge reduce Gas Fees?

No, according to the Ethereum Foundation:

“The Merge is a change of consensus mechanism, not an expansion of network capacity, and will not result in lower gas fees.”

Will the Merge Affect the Transaction speed?

No. According to Ethereum:

“A transaction’s “speed” can be measured in a few ways, including time to be included in a block and time to finalization.

 

Both of these changes slightly, but not in a way that users will notice.”

Will Eth2 replace ETH?

No. After the Merge, there will not be two different networks. Eth2 will phase out and become Eth. The community adopted the terms Eth 1 and Eth 2 to limit confusion within the community.

• Eth1 – the execution layer
• Eth2 – the consensus layer

You can read more about the naming here.

How will the Merge Reduce Ethereum’s Carbon Footprint?

BY transitioning to a Proof-of-Stake consensus model, The Merge will significantly reduce the resource to validate

How will the Merge Affect the Ethereum Network? Do I have to Upgrade My ETH to Eth2?

For general crypto users, the Merge will not affect the network. Nothing will happen to your Eth coins, and you don’t have to do anything.

So, be careful of scams that will require you to upgrade to ETH2. There is no ETH2 token, and you don’t have to upgrade any token. The Ethereum Foundation puts out a warning:

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