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Ethereum (ETH) Merge Update Finally Activated: Everything You Should Know About ETH Proof-of-Stake

Alex Grace

Alex Grace

September 16, 2022

6 min read

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Ethereum, a largest smart contracts platform, is now up and running on Proof-of-Stake (PoS) consensus.

Let’s take a short recap on how Ethereum (ETH) devs and community activated arguably the most ambitious upgrade in Web3 history

What is The Merge in Ethereum (ETH): Highlights

On September 15, 2022, Ethereum (ETH), a most popular hosting platform for decentralized applications and second largest blockchain, replaces its Proof-of-Work consensus with Proof-of-Stake one. This upgrade is set to make the blockchain more eco-friendly and resource-efficient.

As such, why is everyone interested in The Merge activation?

  • Ethereum (ETH) activates The Merhe to replace inefficient and whale-dominated Proof-of-Work consensus by inclusive, democratic, flexible and carbon-neutral Proof-of-Stake one;
  • Prior to The Merge, a community rolled out Beacon Chain, a backbone of PoS design;
  • The Merge upgrade that took place on Sept.15, 2022 ‘injected’ Beacon Chain (consensus layer) into the mainnet (transactions layer);
    With The Merge activated, Ethereum (ETH) integrity is guaranteed by stakers, not by miners;
  • Ethereum (ETH) miners need to migrate towards alternative chains, including the likes of Ethereum Classic (ETC), Ravencoin (RVN), Ergo (ERG), and so on;
  • Some miners decided to continue supporting Proof-of-Work version of the blockchain dubbed Ethereum on PoW (ETHPoW);
  • The Merge won’t affect short-term price performance of ETH; however, it will have significant long-term effects on its monetary politics.

As per the statements of key figureheads of Web3 community, The Merge was activated successfully without notable spikes in missed blocks quantity.

Ethereum Merge Upgrade: Long Road to PoS

Initially, the idea of PoS as the ideal design for Ethereum (ETH) was proposed shortly after the release of its whitepaper. However, its community started to develop infrastructure for its PoW-to-PoS transition in 2020.

The developers created a so called ‘deposit contract’, a smart contract designed to allocate initial ‘staking pool’ for Ethereum on Proof-of-Stake (PoS). Potential validators were invited to deposit 32+ Ethers to join blocks validation process.

Then, the community rolled out a Beacon Chain, i.e. specific technical design required to be a basis of new protocol. Its operations were emulated in a number of testnets including both ‘regular’ (Goerli, Kovan) and purpose-made short-term testnets.

TheScheme_of_Ethereum_Merge

In Q2-Q3, 2022, Ethereum (ETH) started stress-testing PoS activation by ‘merging’ testnets. Largely, the activation procedures took place as intended: here’s why the mainnet activation of The Merge in September was well-prepared.

Why is Ethereum (ETH) Upgrading

Largely, the developers and community chose Proof-of-Stake due to its more democratic and eco-friendly approach. In Proof-of-Work, network participants should purchase expensive mining gear (ASICs) to take part in transactions validating processes.

As such, cryptocurrency mining isn’t inclusive: only wealthy crypto enthusiasts can share mining rewards. The more powerful gear is used by a miner, the higher his/her chances to get a rewards. This trend is in contrast with decentralized ethos of cryptocurrency.

Also, crypto mining consumes a lot of electricity and therefore produces significant carbon footprint. Just like Bitcoin (BTC) and all other Proof-of-Work cryptocurrencies, Ethereum (ETH) was criticized for its negative impact on environment.

Relative_energy_consumption_per_transaction

Last but not least, Ethereum (ETH) on Proof-of-Stake will become deflationary coin faster than using its initial PoW consensus.

Why The Merge Matters for Ethereum (ETH) Ecosystem?

First, entire mining ecosystem becomes irrelevant. Miners should either switch to other business, move their hashrate to remaining Ethash-based coins (Ethereum Classic (ETC), Ravencoin (RVN), Ergo (ERG) etc.) or start supporting Ethereum on PoW (ETHPOW) hardfork.

Then, The Merge radically changes the balance of power in global crypto community. Starting from September, stakers become the most influential players: over 50% of staked Ethers is controlled by Lido Finance, Coinbase, Kraken and Binance. That’s why Ethereum (ETH) critics stated that Ethereum on PoS is already under 51% attack.

Ethereum_staking

Also, radical change in Ethers (ETH) issuance policy results in more robust tokenomical design: Ethereum (ETH) will get the status of deflationary asset faster. Proof-of-Stake consensus is more advanced: it will unlock new scalability opportunities for both L1 and L2 segments of dApps.

Ethereum (ETH) Merge FAQ by GetBlock

To sum up the brief analysis of the effects The Merge has on Ethereum (ETH), its technical progress and adoption, let’s answer on the most crucial questions.

What will happen to my Ethers (ETH) after The Merge?

No action required from coin holders, stakers, lenders, borrowers, traders or liquidity provider. Post-Merge system will use the same token: every ‘ETH2’ airdrop or tokensale is a blatant scam campaign.

As such, all Ethers stored in centralized and decentralized wallets are safe: there’s no need to unlock or unstake them.

Will Ethereum 2.0 replace Ethereum (ETH)?

Ethereum 2.0 (an outdated name of Proof-of-Stake version) will be running as the only legitimate (supported by Ethereum Foundation) successor of Ethereum blockchain. However, a number of ‘alternative’ projects announced that they will continue operating on Proof-of-Work (PoW) consensus.

Ethereum on PoW (ETHPOW) introduced by core ETC contributor Chandler Guo is the most popular of all Proof-of-Work (PoW) hardforks of old blockchain.

Is Ethereum 2.0 better than Ethereum (ETH)?

On the one hand, Ethereum on PoS is way more energy-efficient and inclusive system. There’s no need to buy expensive ASIC-miners to join the process of transactions validation; network supporters should just stake their assets in liquid staking dashboards like Lido or Coinbase. Also, it doesn’t consume much electricity: the switch to PoS is set to reduce global carbon footprint by 0.2%.

At the same time, critics say that centralized heavyweights can control the process of blocks validation through their staking units.

How can I benefit from Ethereum on PoS?

Average ETH holder has a number of ways to benefit from its migration towards Proof-of-Stake. For instance, he/she can stake Ethers in favour of one of large staking providers.

Also, as Ether is going to be a deflationary currency, ‘buy and hold’ strategy might be a smart bet in a long run.

Ethereum on PoS and GetBlock: Leading BaaS provider meets The Merge locked and loaded

GetBlock, a Tier-1 blockchain nodes provider, is proud to announce that The Merge was activated successfully on all of our Ethereum (ETH) nodes. In early September, 2022 we upgraded our software to ensure seamless and smooth transition to Proof-of-Stake.

As such, our clients and their dApps can enjoy all the benefits of new Ethereum (ETH). No action is required: our shared and dedicated nodes for Ethereum (ETH) are up and running. We’re ready to supercharge a new generation of DeFis with high-performance APIs.

Closing thoughts

After five years of preparations, Ethereum (ETH) finally activated The Merge upgrade in its mainnet on Sept.15, 2022. Now all Ethereum (ETH) transactions are verified by Proof-of-Stake consensus instead of now-ceased Proof-of-Work.

This ambitious upgrade is set to make the network more resource-efficient and inclusive.

Alex Grace

Alex Grace

September 16, 2022

6 min read

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