Number 2 cryptocurrency in the world, Ethereum is about to experience one of its biggest updates. Indeed, the future merger of the blockchain Ethereum will have many effects on it and in particular its energy consumption. According to experts, this merger of Ethereum should give it a significant advantage over its long-standing rival, Bitcoin.
Ethereum Merger, what is it?
Fusion Ethereum is a series of technical updates that aim to move the blockchain from proof of work or PoW (Proof of Work) to proof of stake or PoS (Proof of Stake). With this transition, the Ethereum blockchain will significantly reduce its energy consumption and evolve to Ethereum version 2.0. This merge started on September 6 with the Bellatrix update and will continue from September 13-15.
At first, Proof of Stake or Stake (PoS) will be introduced by Ethereum through the Beacon Chain network which sits outside of the blockchain. Then, Ethereum Mainnet and Beacon Chain will merge to complete the transition from PoW system to PoS system.
Why an Ethereum blockchain merger?
Since its creation, the Ethereum blockchain has used the PoW system to secure its transactions. But this one requires a lot of power and consumes a lot of energy to solve the complex mathematical equations that make it possible to exploit the Ethereum blockchain. The merger of Ethereum to the system PoS will further decentralize the blockchain by facilitating the work of node operators. This will also reduce the build-up of energy used by node validators by 99%.
This merger will also increase the speed of transaction confirmation and the security of the platform. Additionally, ETH is becoming a more deflationary asset and new scaling solutions are being introduced. With this Ethereum merger, there will also be a 90% reduction in the number of Ethers mined per day. This will drop from 13,000 Ether to 1,600 Ether.
What are the risks associated with this Ethereum merger?
While the Ethereum merger brings many benefits, it also carries several risks. Among these, we can cite:
- The blockchain attack vulnerability by Denial of Service or DoS. Blockchain proposers will be more vulnerable to a DoS attack. The fact that proposers are known in advance is a risk, as they are exposed to attacks by cybercriminals. But with the anonymous selection of proposers, this risk will quickly be resolved.
- The scams that are the work of encryption apps that confuse the minds of cardholdersETH making them believe in the creation of a new crypto called ETH 2. Because of this confusion, some ETH holders might be tempted to exchange their tokens for ETH 2, but in reality, they would be scammed.
- The centralization of staked ETH and the risk of governance control by certain entities. You should know that staking pools on the Ethereum blockchain have become popular and essential for investors who do not have the 32 Ether necessary for stacking. Therefore, these investors must join groups to raise funds necessary to become a node validator. Thus, in such a scheme, we are moving towards a concentration of the number of nodes under the yoke of a few entities.
- The drop in ETH token prices that could result in the event of an Ethereum merger setback. A potential decline in the price of ETH would cause many cryptos operating in the Ethereum blockchain ecosystem to fall in price.
How will Ether stacking work after the Ethereum merger?
After the Ethereum merger, the stacking (staking) of Ether will be slightly different and one will need to stake 32 ETH in a smart contract to be eligible for block rewards. These Ethers will be locked and to withdraw them, it will be necessary to wait for a future update. Therefore, in order to come up with a new block node to add to the blockchain, one will first need to own and stake 32 ETH.
In case you don’t have all 32 ETH or don’t want to run a validator node, you will need to join a stacking pool to stake Ether. The rewards generated by a pool are distributed among the members of the pool in proportion to the ETH wagered.