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Ethereum Merge: Definitions, Risks, and Every Thing You Need Know

tokenviewAbout 4 min

Ethereum Merge: Definitions, Risks, and Every Thing You Need Know

The time is coming when Ethereum moves from proof of work to proof of stake. While proof of work is fully reliable and secure, ensuring thousands of nodes will reach a consensus, it comes at a cost. Proof of work requires a lot of computing power to solve complex problems, and because of this, also requires lots of energy.

Proof of stake does not require energy-intensive equipment and still improves efficiency, increases decentralization, and resists censorship. Proof of stake will become the new standard for the entire network. Throughout this article, we’ll explain The Merge and tell you ways you can get involved.

What steps on the Ethereum roadmap are required for The Merge?

Steps required on the Ethereum roadmap to get to The Merge include the addition of the beacon chain, removing the proof of work consensus layer, and merging proof of stake into the Ethereum mainnet.

what is eth merge1.What is the Beacon Chain?

The Beacon Chain is a fully independent decentralized network running parallel to the Ethereum Mainnet that uses the proof of stake consensus mechanism instead of Ethereum’s current Proof of work consensus mechanism.

The purpose of the Beacon Chain is to support the transition from proof of work to proof of stake, and it is the first step needed to complete the merge.

The Beacon Chain transition started in November 2020 when a one-way bridge started moving the proof of work chain to the proof of stake chain and started accepting deposits. One month later, the Beacon Chain launched and secured millions of ETH across several validators. So far the Beacon Chain has not experienced any downtime or network interruptions.

2. What is the Merge?

The Merge is a planned Ethereum network upgrade that removes the proof of work consensus layer and merges the Beacon Chain’s proof of stake network into the current Ethereum mainnet. Ethereum’s consensus mechanism is a contribution to the network following Eth1. Eth1 was known as the execution layer. This will soon be deprecated as we migrate towards Eth2, now renamed The Merge.

Primarily The Merge will focus on the execution of upgrading the consensus mechanism and bringing it in line with its original mission: to migrate from proof of work to proof of stake, validate transactions on the blockchain, and add new blocks.

what is eth merge### What happens to Ethereum’s consensus layer and data layer during The Merge?

During The Merge, the consensus layer is upgraded, and the data layer will remain unchanged. Ethereum’s blockchain data is structured so that it consists of two fundamental elements: a pointer and a linked list.

A linked list is a list of chained blocks that contain data and use pointers that point toward the previous block. Since The Merge is not the launch of a new version of Ethereum but rather an upgrade, the data layer won’t be affected in this process.

Once this transformation is complete, Ethereum will now be at a point of a more sustainable, eco-friendly ecosystem.

What happens after The Merge?

After The Merge, the Ethereum blockchain will prioritize adding new features planned through a separate upgrade, a post-merge cleanup, and sharding. Some of the planned features include things like allowing stakers to withdraw staked ETH.

The post-merge 'cleanup' upgrade addresses these features, which is expected to happen very soon after The Merge is complete.

what is eth mergeFinally, the process of sharding will be used to further scale Ethereum. Right now, Ethereum can only handle about 15 transactions a second. With sharding, Ethereum will have the capabilities to scale thousands of transactions by splitting the blockchain into “shards” (separate chains).

Sharding is a commonly used Web2 strategy for scaling databases. However, with Ethereum, this will lower the barrier of entry for validators to store and run data and is much more convenient than running the entire blockchain. Running an Ethereum node from your laptop or mobile device would soon be possible thanks to shard chains.

What are the risks of The Merge?

If The Merge fails, it could create a chain reaction that affects other blockchains and ecosystems dependent on Ethereum.

There is a lot of hope going for the Ethereum merge, but that also comes with risks involved for all Ethereum network participants.

The Merge has an important role in making changes to a current protocol managing hundreds of billions of dollars in assets. It's been known that The Merge has been delayed a number of times.

The most recent delay was in June announcing that The Merge won’t happen in June, but a few months after. The Merge is now expected to ship in Q3 or Q4 of 2022.

Ethereum functions as the base layer for thousands of decentralized apps (dApps). Failure of The Merge could affect many dApps, ranging from altcoins like Basic Attention Token (BAT) to Layer 2s like Polygon (MATIC) and metaverse tokens like Sandbox. In addition, NFTs, DAOs, and other encrypted technologies could be affected.

If The Merge fails to meet expectations, Ethereum currently has 4 unique client implementations of proof of stake Ethereum nodes. This means proof of stake node operators can switch to different clients, if one experiences issues.

5 Common misconceptions of The Merge

1. Stakers get unburnt fees

Not all of Ether is burnt in a transaction fee. Unburnt fees, or tips on the execution layer, will be sent to stakers. This is due to proof of stake that will exist after the merge. In addition to new Ether minted as a block reward, you also get 30% of all transaction fees.

2. Once the merge happens, you will be able to withdraw ETH

You won’t be able to withdraw your ETH post-merge. There will be another update about 6 months later, at which point you’ll be able to withdraw. Keep in mind that the ETH you stake will be locked until the update to withdraw exists. The merge aims to keep simplicity, focusing on one step at a time.

3. The merge will reduce gas fees

This is not the case. Sharding will reduce gas fees, but this will be a focus post-merge. This later phase is expected in 2023. It should be known that Layer 2s will begin to take on a larger role post-merge as well.

4. Running a node post-merge requires ETH

This is another misconception. Ethereum never required ETH to run a node. You can be a staking validating node and add transactions to the blockchain, or you can be a listening node and send transactions to the mempool via your own node. It’s easy and accessible to run a node. No ETH is necessary in order to run a node.

5. A new ETH2 token will exist and be minted

This is not true, since the Ethereum network won’t have a new network, nor a new token. This is why the Ethereum Foundation is doing away with the “Eth1” and “Eth2” terminology.

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