We all have been waiting for this big moment, yes, the Ethereum merge is finally happening. It is scheduled to happen at 11:59 am IST and will take approximately 12 minutes to be completed. That is in case everything goes as planned. After the merge, the ETH network will move to the beacon chain and will no longer use the proof of work consensus to validate transactions. Ethereum 2.0 will be based on the proof of stake mechanism which will reduce the network energy consumption by 99.5%.
What does the merge mean for miners?
The ethereum merge is finally happening, but not everyone is excited. Especially the miners who would now have to shift to some other coin because ETH cannot be mined anymore. This is also the reason that since the timeline for the merge has somewhat been finalized, GPU prices have started to fall. At least, the gaming industry will see some relief because of the lowering prices of hardware after this merge.
Miners aren’t happy that they are just being cut off from the network and won’t be required anymore. But we must also note that the merge has been planned for years now. So, it is not as if they have been given a week’s notice for the same.
It is expected that ETH miners might shift to some other coin like Ethereum Classic, which will still be operating on the proof of work mechanism. Now some of you might ask, why not Bitcoin? It’s because mining BTC requires specialized hardware known as ASIC. So, GPUs cannot mine it efficiently.
Looks like the "hashrate will drop weeks before the merge due to miners rushing to sell ahead of everyone else" thesis has been proven completely false.
It is surprising that the hash rate of Ethereum hasn’t fallen much, even though we aren’t even a day away from the merger. Vitalik Buterin shared a chart showing that ETH hashrate has dropped only by 5-10% in the last few months. He also said that such a small drop wasn’t expected. It looks like the miners are sticking to take the last bit of profits before ETH cannot be mined anymore.
What will the ETH network look like on POS?
With the POS mechanism, ETH will follow the footsteps of many other popular coins like ADA and MATIC that are based on the same. In proof of stake, the network doesn’t require miners to validate transactions by solving complex problems. Rather, it calls for validators who stake their ETH on the network and are given rewards to add transactions on the blockchain network.
So, can everyone who owns ETH become validators on the network? Yes and No! Because to become a proper validator and have your own node, the minimum requirement is 32 ETH which is a lot. However, you can deposit any small amount of Ethereum you have in staking pools operated by exchanges and get interest on your holdings.
The best part of the Ethereum merge is the reduction in energy usage, which will make it much more environmentally friendly as compared to Bitcoin. Authorities might even give it preference after the merger. However, there are downsides to this as well.
A security expert recently pointed out that the ETH merger could make the network less secure on paper. He said that if a validator can add two consecutive blocks on the network, he can start an exploit to end on n and n+1 blocks. This was not possible on the POW consensus because there the chances of a miner getting two consecutive blocks were very slim and purely by chance. So, they cannot plan an attack in advance.
If we talk about it practically, the security difference wouldn’t be much. However, it is something that investors much know about. ETH developers are already working to solve the consecutive block problem, but it is difficult to say how long that will take.
What could go wrong after the merge?
We are all excited about the Ethereum merge happening, but there are plenty of things that could go wrong after the merge happens. Let’s start with the most important, which is technical issues. Even though ETH developers have taken their sweet time to do trial runs of the merge, it is still going to be one of the most complicated network upgrades in history.
During the merge, a consensus layer client and an execution layer client will run and communicate via the engine API. So, one small error could lead to a lot of glitches. However, let’s be positive that the developers have ticked all the checklists, and there won’t be any problems.
Then we have operational issues. The ETH POS network will need validators to operate, but configuration issues have pushed validators to go offline. If this happens again, it could take a toll on the network. The developers need to communicate properly with the validators on how they should set up their nodes to make sure there is no confusion.
A Twitter user Adam Levitin pointed out that the merge could put ETH in the securities category. And it might face regulations by the US SEC. Till now, it has been considered a commodity just like Bitcoin and hasn’t faced any regulatory problems. But that might change in the future.
ETH POS could bring Chinese miners and investors back into the market
An interesting theory about the proof of stake network is that it could bring back investors from China back to the market. The Chinese government there banned crypto because of the huge energy usage and environmental impact. And since Bitcoin mining consumes a lot of electricity, it wasn’t that difficult for authorities to pinpoint illegal operations.
However, with Ethereum, the energy usage would be so minimal that Chinese investors can join the network as validators without being caught. Now, this might sound shady, but it’s how it is. China contributed to more than 60% of the total BTC hash rate before the ban happened. So, we can be sure that if there is an opportunity to get back in the game, they will take it.
EthereumPOW plans to keep miners active
As the Ethereum merge is finally happening, ETHW, a splinter from the Eth blockchain, which operates on the proof of work consensus has announced plans to do a hard fork after the merge happens today. It will be completed within 24 hours. This POW token has gotten a lot of interest from exchanges, and some of them have already listed it. Do note that it is not doing that well in terms of price and is down nearly 80% from its ATH of $141.36.
It is difficult to say whether ETHW will survive because its developers haven’t still been able to remove the difficulty bomb from the network. They are working on it, but it will be difficult to say how long that will take. Vitalik is also not very positive about this token and calls its supporters people who want to make a quick buck and own a couple of exchanges.
Expected price action after the merge
Many analysts and investors are expecting that the Ethereum merge is going to blow some life in the crypto market. We also saw an initial rally that pushed the price to $2,000 before tracing back to lower levels. Recently, the rally picked up again, but the latest CPI report released by the US had a negative impact on all global markets pulling prices down again.
It is also difficult to say whether the merger will trigger a rally or short-term investors will sell the news to make a quick buck. I am banking on the idea that we will see something positive considering the price of Bitcoin doesn’t fall much below $20k.
The Ethereum merge will begin in the next 1 hr 23 minutes. If you want to check the live timer of the merger. Visit the website Wen Merge.
What are your thoughts as the Ethereum merge is finally happening? And do you think this will have a negative regulatory impact on the coin? Let us know in the comments below. And, if you found our content informative, do share it with your family and friends.