The Ethereum Merge|Key Facts About the ETH Merge

What led to the Merge?

PoW has always been criticized for its heavy energy consumption, and Ethereum must break away from this shackle if it wishes to become a super ecosystem in the crypto market. As such, the network has decided to shift to PoS, which will reduce energy consumption by about 99.95%.

Basic facts about the Merge

There are two types of Ethereum nodes: block-producing nodes and non-block-producing blocks. Only block-producing nodes will need to “stake 32 ETH”, while others do not, whether it’s before or after the Merge.

What changes will the Merge bring?

The Merge will reduce the annual ETH inflation rate from 4.3% to 0.43%. With PoS, the ETH issuance is reduced by over 90%, which will be seen as bullish news if the market demand for ETH remains the same.

What are the impacts of the Merge?

For miners, the Merge will be a huge blow. Ethereum plans to switch from PoW to PoS, which has more pros than cons for the whole ecosystem. That said, ETH miners will have to struggle to find the next destination. One choice is to switch to other PoW-based cryptos. However, considering the mediocre returns on other chains, as well as costs such as electricity and maintenance fees, it will be difficult for them to make a profit. Another way out is to sell their GPU mining machines now to stop losses in time. Finally, miners can also go with the “Ethereum fork”, which has generated heated debates over the recent period.

Proponents:

On August 4, Poloniex, a TRON-based crypto exchange, announced that it will support the ETH 2.0 upgrade and the potential fork and will launch two potential forked ETH tokens (futures), as well as the corresponding markets, on August 8.

Neutral parties:

On August 8, f2pool, the second largest Ethereum mining pool, said: “Ethereum miners are the unsung heroes of the Ethereum ecosystem. It doesn’t matter anymore whether to support the ether fork or not, we will let the miner community decide.”

Opponents:

On August 9, USDC issuer Circle stated that it shall only support the Ethereum PoS chain once the network has gone through the Merge.

The significance of the fork

To begin with, we should make it clear that the fork would be a hard fork if it does happen, which means that the blockchain will be divided permanently. After major upgrades to the blockchain system, Ethereum would be split into two chains with identical blocks before such upgrades.

Opportunities presented by the Merge and the potential fork

Let’s first focus on the opportunities presented by the Merge. For retail investors, liquidity staking represents an easy, less risky investment channel available on platforms such as Lido (LDO), Rocket Pool (RPL), and Stakewise (SWISE).

Conclusion

The Merge is a major milestone in the evolution of Ethereum, and it will lead to huge progress in both technical designs and economic models. Some might argue that the hard fork would not be consistent with the blockchain principles, but they are wrong: It is the blockchain space that created the possibility of this hard fork, and only the market will have the final say as to whether it will succeed or fail.

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