Update: the Ethereum merge successfully completed on 15 September 2022 - hurrah! This short guide outlines some of the background and context leading up to this pivotal event for the Ethereum network.
Ethereum (cryptocurrency ticker: ETH) is currently the second largest cryptocurrency network by total market value, and this month it gets its biggest upgrade yet - the Ethereum ‘merge’. If you’re not yet familiar with Ethereum, you can check out our starter guide - otherwise, read on to find out what you should know about the Ethereum merge and what it means for you.
What is the Ethereum merge?
Currently, Ethereum has two consensus mechanisms - systems used to collectively agree on what has happened on a blockchain network - running individually in parallel. The merge brings these two systems together at the live transaction processing level, switching off the old consensus system (proof-of-work) and activating the new one (proof-of-stake).
As the Ethereum merge info page explains it, a new engine has been built and tested on the side, and now it’s time to integrate it into the existing ship.
When is it happening?
Why is it happening?
To achieve the Ethereum community’s ultimate vision of making Ethereum a more scalable, more secure, and more sustainable blockchain network.
- Ethereum will be more energy efficient thanks to its new proof-of-stake engine, with an estimated reduction in energy consumption of around 99.95%.
- Staking rewards (a yield paid in the ETH cryptocurrency to those who choose to lock up their ETH to secure the network in the proof-of-stake system) are likely to increase. Current estimates put this increase at around 50%, or a payout of ~6-7% compared to the current ~4%.
- Issuance of new ETH will reduce by approximately 90% which, when coupled with fee-burning mechanisms, may make the ether cryptocurrency deflationary overall (aka the overall supply of ether could reduce over time).
What doesn’t change?
On the flipside, the merge will not have any meaningful impact on gas fees (the charge users pay to make transactions using the Ethereum blockchain) or indeed transaction speeds. However, the upgrade does set the scene for further scaling improvements in the future.
Anything I need to do if I’m holding ETH?
From a holder’s perspective, nothing at all! Please be on high alert for scammers and anyone asking you to migrate, convert, upgrade or otherwise send your ETH coins to any external address. There is no new ETH 2.0 token and nothing more you need to do from your side to keep your funds safe.
What could go wrong?
The merge is no mean technical feat - this upgrade is being done ‘mid-flight’ or something akin to blockchain open heart surgery. As such, there’s always the risk that things could go wrong, whether it is in the processing of transactions on the main Ethereum network or in the decentralised applications that rely on it. With that said, this upgrade has been a very long time in the making, and has been thoroughly battle tested on a variety of test networks. Do keep your eye out for further updates around the time of the merge.
Will any Zumo services be impacted?
We don’t currently expect to have any downtime during the merge period, however it is a live event so please do keep an eye on the Zumo social media channels for relevant updates.
What about forks?
A fork is a split in a blockchain network that takes place when participants cannot agree among themselves on the rules that govern the network. While the majority may be supportive, not everyone is on board with the merge, and there is the possibility that some (notably miners, who now become defunct) may seek to operate forked versions of Ethereum that operate by the old rules. Zumo will support the merged proof-of-stake chain by default, and this will retain the ETH ticker. We do not currently intend to support other proof of work forks that may emerge, though we will evaluate each case on its merits.
That just about wraps it up for this FAQ. Of course, it’s an evolving situation, so please do keep an eye on our social media channels for any further updates.
Wen merge? Soon!