The Merge, Ethereum’s long-awaited transition to proof-of work (PoW), is now underway. It will take less than 10 hours. There are many things to be aware of in the wider cryptocurrency market. Here’s what you should know.
What is the Merge?
As the execution layer of the Beacon Chain merges with the new PoS layer, the Ethereum blockchain will move away from the energy-intensive consensus mechanism PoW.
The Beacon Chain was launched in December 2020. It allows ecosystem participants to deposit or “stake ETH” to become validators of the network. This replaces PoW miners who had previously worked hard to produce blocks, process transactions and secure the network.
The Merge, in its simplest form will reduce the Ethereum network’s energy consumption by 99% and increase security, sustainability, and scalability.
The Ethereum mainnet (PoW), and the Beacon Chain(PoS) were running simultaneously. They will eventually merge, thereby naming the new era of smart contract blockchain networks. As the new consensus mechanism assumes control of the network, all transactions will be preserved.
Who will maintain the network after the Merge
Users who can stake a total 32 ETH can become validators on the Ethereum Beacon Chain. Validators are responsible for creating blocks at random and validating transactions as well as blocks created by others in the network.
You can also participate in centralized or pooled staking pools. Users will receive a portion of the rewards for validating and maintaining ETH. If you are interested in taking part in the new network’s consensus mechanism, there are many staking options.
Nansen, a blockchain analytics platform, has revealed that only 11% of all circulating ETH is currently staked. This includes 65% liquid and 35% illiquid. There are 426,000 validators, and around 80,000 depositors. However, a small number of entities control a large portion of staked ETH.
Nearly 30% of staked ETH is held by three major cryptocurrency exchanges: Coinbase, Kraken, and Binance. Lido DAO is the largest Merge staking provider with a 31% share. A fifth unlabelled group validators holds 23%.
Are there forks in the Ethereum blockchain?
Cointelegraph reported that the Merge will see ETH (the native currency of Ethereum) remain after the mainnet joins to the Beacon Chain. It is important to note that PoW miners who previously mined blocks and maintained an execution layer have stated that they will continue doing so.
While the PoS-powered Ethereum blockchain will use ETH again after the Merge is complete, another PoW Ethereum network, dubbed ETHPOW could create an ETHW token.
Financial service providers offering exchange-traded products (ETPs), that are tied to any particular blockchain’s underlying asset, are considering this option. Some firms might consider offering exposure to forked PoW chains if investors are interested.
Existing ETPs and funds with exposure to ETH are not required to do anything. ETH will continue to exist until the Beacon Chain implements PoS consensus.
What do I need to do?
The average Ethereum user or ETH holder should not be concerned about losing their funds, changing preferred wallets, or worrying about making changes before the Merge. All funds in wallets remain safe and accessible because the entire history of Ethereum is preserved in the transition.
Be wary of scams. Cointelegraph has put together a list of three ways that malicious actors have tried to take advantage of the Merge event. Fake airdrops, fraudulent staking pools, and upgrade scams are all being promoted. To receive new tokens, you don’t need to send ETH or upgrade your wallet.