There is a great possibility that you are familiar with the Merge if you have even a basic knowledge of the blockchain and Web3 ecosystem. In the course of our nascent industry, it is the most significant upgrade to a blockchain network.
Is it the “Merge” or “Ethereum 2.0”?
The Ethereum Merge, formerly known as Ethereum 2.0, is expected to include a series of planned upgrades to the Ethereum network that are intended to enhance the functionality of the blockchain and make the network more scalable, safe, and long-lasting.
Let’s first start with an overview of Ethereum.
Ethereum is a blockchain platform whose principal role is to store and run smart contracts, which are transactional algorithms inscribed into the blockchain. In addition, Ethereum serves as a ledger for Ether (ETH), its native cryptocurrency.
The Ethereum network intends to switch from a Proof of Work (PoW) mechanism to a Proof of Stake (PoS) mechanism as part of the merger. Users will then have the option to stake, or lock, their Ethereum and gain access to a part of it in exchange for completing computations required to add new blocks to the blockchain.
Since the Ethereum Merge is considered as an improvement rather than a brand-new network, it is no longer referred to as Ethereum 2.0.
The Merge aims to increase the scalability, security, and sustainability of Ethereum. At last, if everything is happening according to the plan, Ethereum’s crypto mining would become obsolete, significantly reducing its environmental impact. Additionally, since fewer coins are anticipated to be issued, the supply of Ether is also expected to decrease. Further, institutional investment in the Ethereum network is anticipated to rise.
Nevertheless, there are other stories about the Merge that is inaccurate. It could be challenging to distinguish between what is true and what is false.
However, the five myths stated below stand out from the others.
Misconception 1: Ethereum gas fees will be decreased after the Merge.
One of the significant myths among investors and traders is that Ethereum’s upcoming update will lower its infamous gas fees (transaction fees). While decreased gas fees are the number one wish of all investors, the Merge is a consensus mechanism upgradation that will switch the Ethereum blockchain from proof-of-work (PoW) to proof-of-stake (PoS).
Instead, decreasing gas fees in Ethereum will need to work on enhancing the network’s throughput and capacity. To reduce transaction costs, the developer community is developing a rollup-centric roadmap.
Misconception 2: Ethereum transactions will become instant after the Merge.
We can suppose that Ethereum transactions won’t be faster. However, this claim has some veracity, as Beacon Chain allows validators to issue a block every 12 seconds on the mainnet (it can also be around 13.3 seconds).
Although Ethereum maestros predict that switching to PoS will enable a 10% increase in block generation, users won’t notice the minor change.
Misconception 3: The Merge will cause the Ethereum blockchain to go down.
Contradictory to common belief, which foresees favorable effects for Ethereum from the Merge, hearsay has claimed that the scheduled upgrade will definitely bring down the Ethereum network.
The developers don’t expect any downtime, as blocks go from being generated using PoW to being built using PoS.
Misconception 4: Following the Merge, investors will be able to withdraw staked ETH.
Staked ETH (stETH), crypto-backed 1:1 by Ether (ETH), is currently locked on the Beacon Chain. People would like to be able to withdraw their stETH holdings; however, the developer community has mentioned that this modification is not made possible by the upgrade.
Withdrawal of stETH holdings will enable the subsequent significant upgrade after the Merge, known as the Shanghai upgrade. Because of this, the assets won’t be able to be used for at least 6 to 12 months after the merger.
Misconception 5: Until the Shanghai upgrade, validators won’t be able to withdraw their ETH rewards.
Validators will have quick access to the fee rewards and Maximal Extractable Value (MEV) generated during block proposals from the Ethereum mainnet or the execution level. At the same time, stETH remains restricted for investors until withdrawals are resumed after the Shangai upgrade.
The fee reimbursement will be available to the validator immediately because it won’t be made up of newly issued tokens.
What’s ahead of Merge: Surge, Verge, Purge, Splurge?
Even Ethereum’s leaders find it challenging to foresee the network’s long-term future, given how dynamic the cryptocurrency industry is.
Here is a short rundown: The Surge, which follows the Merge, should deliver “huge scalability,” or speedier operation, because of L2s and a technological advancement called sharding.
From there, things become a little more complicated. The Verge employs a technology known as “Verkle trees,” which, among other advantages, should optimize data storage on the network, thus increasing Ethereum’s scalability. On the other hand, the Purge includes deleting “historical data and technical debt,” which minimizes the hard drive space needed for validators to operate. And finally, The Splurge ought to bring forth more improvements.
For now, everyone is excited about the launch of the Merge that’s going to happen soon in September 2022!
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn’t represent any investment advice or WazirX’s official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.