What is the Ethereum merge? What will it bring about? — -AEX Academy
The “the merge”that everyone is looking forward to is deferred again. On April 12, one of the core development members of the Ethereum Foundation Tim Beiko posted on Twitter that the time of the Ethereum merge is not the end of the second quarter as scheduled. Added to that the downward trend of the digital financial industry around the globe, and Ethereum’s circulation market cap has decreased nearly 65%, from $355.591 billion to $231.006 billion. Will it rise again? Or is now the best time to buy Ethereum? On top of all, cryptocurrency investors need to fully understand what the Ethereum merge is.
Given that the Kiln Merge Testnet ran smoothly in the first quarter, people are expecting the Ethereum merge will happen in June. When “The merge” becomes a trending topic on the internet, the FOMO caused by the Ethereum merge also partly resulted in the price fluctuation of the ETH. Its trading price has increased 23.47% within three months and reached $355.591 billion this April. Due to the second delay of the merge and the downward trend of the worldwide financial industry, the price of the ETH can not escape the bad luck and dropped sharply in recent times.
What is the Kiln Merge Testnet? Why can it exert so big an impact on the price of ETH?
As the last testnet before the upgrade of the Ethereum mainnet, the Kiln Merge Testnet was used to simulate the Ethereum merge by the development team. Before that, Ethereum launched the Kintsugi Merge Testnet. The name Kintsugi comes from a porcelain repairing technique in Japan, which is to repair broken porcelain with gold, so as to make it stronger. While Kiln is a kind of oven, in which clay can become hard material due to high temperature. So as their names imply, Kiln is the next process of Kintsugi. After finishing all the fixing works that the Ethereum merge needs, the result will be tested in the oven Kiln. Is it an article of firm porcelain or a pile of waste? The answer can be found in the Kiln Merge Testnet.
From the official statement, they have met some problems in the process of merging. As of April 2022, all client teams have in-progress implementations for The Merge, which have been tested by test suites, the launch of new testnets and shadow forks. Shadow forks, run against both existing testnets and the Ethereum mainnet, have revealed implementation issues in clients. Teams are now fixing these and regularly re-running shadow forks to test fixes. Once clients work without issues during shadow forks, then the existing Ethereum testnets (Ropsten, Goerli, etc.) will be run through The Merge. An announcement will be made on blog.ethereum.org at this point. Once testnets have successfully upgraded, and remain stable, then a time will be set for the upgrade to happen on the Ethereum mainnet.
The road to the Ethereum merge is long and hard, and when it will truly happen remains unknown But what is worth noticing is that Tim Beiko said that now is not the best time to invest in mining rigs However, one’s trash is another’s treasure. It is good news for those possessing many mining rigs.
Why do Ethereum merge?
Now, Ethereum is powered by PoW. The progress of miners obtaining cryptocurrencies through computer calculation is called mining. The mining income is up to the configuration of “mining rigs”. This process will cost numerous hash power, and due to its high energy consumption and carbon emission and the result of environmental degradation, mining is heavily criticized.
In fact, Ethereum has drawn the blueprint of its future development since it was established. As planned initially, Ethereum will experience 4 stages, including Frontier, Homestead, Metropolis, and Serenity.
Stage one to stage three were completed before 2020, so the focus is more on stage four Serenity in recent years. Its main purpose is to swap out the proof-of-work (PoW) consensus mechanism with a more energy-saving proof-of-stake (PoS) consensus mechanism.
Early in 2017, the development team of Ethereum launched an Ethereum 2.0 upgrade plan. One of the purposes is to finish the swap. However, it is not totally done yet till today. The Ethereum Foundation amended and renamed it earlier this year. The Ethereum 2.0 was replaced by the Ethereum merge plan, with the aim of the switch from PoW to PoS in every respect.
What is the Ethereum merge?
The beacon chain of Ethereum by now is apart from its mainnet. Ethereum mainnet applies PoW, while the beacon chain relies on PoS. “Merge” means the join of the beacon chain and the mainnet.
It will become shard chains of Ethereum after merging, applying PoS instead of PoW.
The mainnet will bring the smart contracts into PoW. And thanks to Ethereum’s completed history and stable status quo, ETH holders and users will hopefully adapt to the transformation in a reliable way.
The energy consumption of Ethereum will decrease by 99.95% after merging. At the same time, the high-end graphics cards for mining will flow back to the market. Panic purchasing cards will not occur anymore.
Differ from the hash power competition of PoW, PoS is mainly based on how long and how many tokens you hold to give rewards. The more tokens you possess for a long time, the more possible it is to obtain increased benefits and rewards.
PoS can not only address the energy consumption problem but also increase verification efficiency. It is the reason why Ethereum will be powered by PoS in all respects after the merge.
Many basic works required by the Ethereum merge are completed by now.
· The beacon chain launched
· Fork simulated
· A group of loyal PoS users accumulated
What will happen after the Ethereum merge ?
1. No new Ethereum tokens occurs after the merge
According to Tim Beiko, the founder of Ethereum, no new Ethereum tokens will occur after the merge. The ETH remains the same.
The Ethereum merge was called “Ethereum2.0” or “ETH2”. But the Ethereum Foundation and core development members claimed in January to remove this label. The Ethereum Foundation wrote in a post that “Unfortunately, malicious actors have attempted to use the ETH2 misnomer to scam users by telling them to swap their ETH for ‘ETH2’ tokens or that they must somehow migrate their ETH before the ETH2 upgrade.
Beiko suggests investors “doubt” any non-official promise of airdrop and free tokens related to the merge.
2.The merge will not decrease Ethereum’s fees
Another mistake is that the merge will decrease Ethereum’s “gas fees” or exchange fees. Beiko said it was not true.
The merge will only help Ethereum to switch to PoS from PoW, and at the same time, mining would be out of time.
Many people may expect the possibility of “gas fees” to decrease because network congestion may result in hundreds of dollars of extra Ethereum transaction costs. But it won’t happen, said Beiko.
3. Ethereum is going full deflation
The merger will help Ethereum go into deflation. The number of destroyed ETH has exceeded the number of ETH obtained from mining. The beacon chain allows users to become validators via collateralizing 32 ETH. With 10.5 million ETH collateralized on the beacon chain, the yield reaches an incredible 4.8% calculated by the ETH currency standard. Once the beacon chain of Ethereum merges with the mainnet, the yield will jump to 10%-15%, 2 to 3 times the previous record. However, it is worth saying that Ethereum provides a limited number of pledge vacancies, and the collateralized ETH can not be sold or traded until the mainnet upgrades.
Anyway, ETH will act as the most popular cryptocurrency once the Ethereum merge is finished.
4. What will the merge bring to the programs on shard chains
As the development team initially planned, the next step after the merge is to provide scaling solutions. Shard chains will be put on the agenda. At this stage, Ethereum will scale from one chain to 36 shard chains and the efficiency will be largely increased correspondingly.
Shards, or block sharding, as a common concept in computer science, is the process of splitting a database horizontally to spread the load. In an Ethereum context, sharding will reduce network congestion and increase transactions per second by creating new chains, known as “shards.” It will eventually let you run Ethereum on a personal laptop or phone, instead of computers with great hash power. This drastically reduces both hardware requirements and running costs.
Tokens such as Zilliqa(ZIL), and NEAR Protocol(NEAR)applying shard techniques, by virtue of their lower fees than that of Ethereum, have become the favourite alternatives as regards those programs spilt from Ethereum.
The Ethereum Foundation plans to launch shard chains upgrade in 2023, but considering its overall difficulty and the shelving of previous plans, when would the next stage of upgrade start still need to wait until the Ethereum Foundation is fully prepared. the Ethereum merge has a limited impact on popular programs such as ZIL and NEAR in the short term.
The Ethereum merge might be the most historical event in the development of the cryptocurrency industry. Whether it succeeds or not, the Ethereum mainnet will not stop switching from PoW to PoS, and the mining at the cost of the environment will become history in the future.
About AEX Academy
The AEX Academy of Digital Financial Research (abbreviated as “AEX Research Academy”) was established in early 2022. It is the main source of information in AEX Global’s strategic ecosystem and aims to provide people in the blockchain industry with a solid theoretical foundation and assessment of trends. Research areas include blockchain and digital finance and technology research, market analysis, applied innovation, financial product models, and new model exploration. Researchers are spread across more than 50 countries and regions, including the United States, Singapore, France, and South Korea.
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