The Ethereum Merge: What Is It?
The Ethereum Merge is touted as one of the most significant moments in blockchain history. What does it mean for Firstrade customers?
The Ethereum merge has been a major blockchain topic for several years now. At the launch of the Ethereum network in July 2015 the most visible and still actively involved co-founder, Vitalik Buterin, revealed that there was a chance the network would choose a different consensus mechanism, such as Proof-of-Stake (PoS), in the future.
“The Merge”, as it became known as, was technically a concept as far back as then, but the idea began to materialize in December 2020 when Ethereum released the Beacon Chain as the initial step towards making the merge live.
“We may choose later on to adopt alternative consensus strategies, such as hybrid proof of stake, so future patches may reduce the issuance rate lower." - Vitalik Buterin, Co-founder, Ethereum (published on Twitter on launch day, July 30, 2015)
What Exactly Is The Merge?
The Ethereum merge refers to the event which transitions the Ethereum blockchain from a Proof-of-Work (PoW) consensus algorithm to PoS. There are multiple reasons which seemed to have encouraged the Ethereum network’s decision to effectively merge to a PoS consensus mechanism. One of the main reasons is PoW has been shown for some time now, to drive a high energy demand and carbon footprint when compared to the PoS alternative, and also other alternative consensus mechanisms. Machines take part in the process of mining which necessitates a high degree of energy which is dedicated to working towards solving difficult mathematical problems in order to earn block rewards, for facilitating transactions on the blockchain. This is how the traditional PoW network operation is carried out, including with Bitcoin.
The PoW consensus mechanism varies considerably from PoS, which instead is proven to use substantially less energy than PoW in its network consensus implementation. PoS is facilitated by a set amount of tokens (32 ETH), being staked by nodes known as validators on the PoS-based blockchain. Once tokens are staked, nodes take part in the validation process by confirming to the chain when it witnesses transactions which occur. This agreement aids the network in reaching consensus, and nodes are rewarded with a portion of transaction fees and sometimes alternative or additional perks and crypto.
Ethereum merged on Thursday, September 15. The merge to PoS still has more stops ahead, but it would be helpful to see what can be expected to be altered or not after the occurrence of one of the most major cryptocurrency events for some time.
How Is Speed Affected By The Ethereum Merge?
The speed of the Ethereum network previously lied around 13 to 14 seconds to process a transaction. Now after the merge that was just conducted Ethereum is anticipating running at 12 seconds standard to process each block. The difference is only slight, so while there is an improvement to speed, the speed is expected to be boosted significantly once the network evolves into the live use of sub chains, more specifically shard chains which will assist in sharing network processing to make the platform more efficient.
There are 64 shard chains which have been mentioned for some time as the number of shard blockchains which will be developed and integrated into the Ethereum network. It is expected that the shard chains will be ready for live implementation at some time in 2023. At that point in time Ethereum is anticipated to make considerable positive changes to the rate of network transaction speed which equates to a more seamless and rapid process when an individual goes to send or buy Ethereum.
Is The Merge The Creation Of A New Blockchain?
The merge was not an event which saw Ethereum move to an entirely new blockchain. Instead, the Ethereum blockchain network was merged, or aligned together in order to complete the recent upgrade.
Specifically, the Ethereum Virtual Machine (EVM) which is the fundamental chain of the Ethereum network, will continue to process transactions and smart contracts for the stacked network. Consensus will be maintained in the new Beacon Chain which is what was launched in 2020 to open staking for the network and just recently fused together with the Ethereum main chain in the merge event.
How Will Network Fees Be Impacted By The Merge?
For now network transactions, also referred to as gas fees, on the Ethereum blockchain are not expected to change as a result of the merge. The underlying processes required to power the fundamental layer which is responsible for facilitating transactions and smart contract functions remains intact, so network fees are expected to be the same. The introduction of shard chains along with other technologies that it will bring together, is expected to decrease network fees not very far into the future.
What Does This Mean For Firstrade Users?
Firstrade users will not need to do anything regarding the merge.
As ETH is held in a secure omnibus wallet on customers behalf, the merge will seamlessly take place on the backend. The number of ETH you have traded in your account will stay the same. There may be price volatility connected to the Merge, as big events like these can cause price speculation to both up and down sides. Customers should monitor the price of ETH over this time.
Final Points Surrounding The Merge
To recap - the merge upgrade to the Ethereum mainnet was completed early in the US morning hours on September 15. The merge has been a long anticipated event which was foreshadowed at the Ethereum network launch by its co-founder Vitalik Buterin back in 2015, making it seven years plus in the making. Since that time talks of the merge have been a consistent element of Ethereum news, and the event has finally been completed.
Not everyone is a fan of PoS. There are some enthusiasts who desire to continue to operate the Ethereum PoW blockchain, and have vowed to maintain an aspect of Ethereum as it stood prior to the merge. It still remains to be seen what forks (different variations of ETH), may yet arise upon more time passage after the successfully completed network update.
The Ethereum network merge will see more phases on the road to multiple shard chains and what the network believes will be an even more greatly efficient blockchain network.