Here’s what you need to know about Ethereum 2.0’s Merge
Ethereum had been aiming to merge its proof-of-work (PoW) mainnet with its proof-of-stake (PoS) network next year. But now a developer has optimistically predicted that the Merge with its so-called Beacon Chain could occur as early as mid-September.
That’s two months from now.
Specifically, during a July 14 conference call, Ethereum developer, Tim Beiko, put forward September 19 as a possible date for the merger. At the time, Ethereum was trading around $1,100. Today, four days later, it’s worth $1,500.
Whether the news caused or correlated with that rally is debatable, however. Almost all crypto assets rallied during the four days since July 14. Globally, crypto assets gained a combined market cap of $100 billion during that time period.
What is Ethereum’s Merge?
The Merge is the moment when Ethereum’s blockchain begins to phase out PoW in favor of PoS. Currently, all base layer Ethereum transactions are protected by legions of computers mining blocks around the world. The Merge will occur when this computing power securing Ethereum’s blockchain declines below 100%.
Post-merge, Vitalik Buterin’s eventual goal is to push Ethereum toward 0% PoW within a few months.
Ethereum leader Buterin has been promising the transition since 2016.
- He first predicted a Merge-like event in 2017 but instead began what would become a semi-annual tradition of delaying the move.
- He occasionally acknowledged the delays but has still already delayed the Merge at least once this year.
- Ethereum 2.0 was repeatedly delayed in 2021. A planned April 2021 Ethereum 2.0 merger saw a delay amid dropping prices for PoW mining machines. In June 2021, conflicts between the team caused another Merge delay.
While dealing with delays, the Ethereum team repeatedly defused a difficulty bomb that would have ruined Ethereum’s PoW without their centralized intervention.
Nevertheless, Buterin’s intention to activate the Merge seems particularly credible in recent months. The public has given him a vote of confidence and investors have irrevocably staked over 13 million ETH ($19 billion) coins into the Beacon Chain. The majority of this Ethereum is controlled by a single protocol, Lido.
Read more: Here’s why Ethereum 2 staking is risky and increases centralization
More details about the Beacon Chain
Beacon Chain launched as a separate system on December 1, 2020. Ethereum developers say Beacon does not directly process transactions or smart contract interactions. Instead, it provides a new consensus engine and coordinates the network of Ethereum stakers. Its role is to ensure that data is available for viewing instead of modifying the data directly.
Beacon Chain developers conducted testing and offered bug bounties. In their opinion, it’s almost ready to integrate with Ethereum’s $182 billion mainnet.
Ethereum developers estimate that the Merge will set up a pathway to sharding. Sharding is a method for even distribution of data storage. Ethereum plans to use it to reduce the costs of using Layer 2 protocols and reduce client storage requirements.
The Ethereum roadmap includes implementing sharding sometime in 2023, though this depends on how soon the team can smoothly integrate Beacon Chain with the mainnet.
Ethereum is also paving the way for improved security, even in cases where clients might not download all of the data onto the mainnet. It currently plans to add KZG or “Kate” commitments to compensate for possible security weaknesses in Merkle roots.
KZG commitments use polynomial equations as part of a verification system for cryptographic protocols like the ones used to add new blocks of data onto a blockchain.
Big money at stake
Beacon Chain currently has approximately 410,000 active validators with over 13 million ether ($19 billion) eligible for voting.
Lido currently offers 3.9% APR to users. Stakers depositing over 32 ETH can earn 4.2% APR by activating their own set of Beacon Chain validator keys. After the Ethereum Merge occurs, Delphi estimates that Ethereum’s APR could rise up to 10.3%.
Ethereum users who do not stake will receive de facto penalties by not receiving any APR interest.
Preparations for the Ethereum Merge include changing the name of “Eth1” to the Execution Layer. This layer includes Ethereum implementations like Geth, Ethereum’s most popular.
Buterin renamed Ethereum 2.0, or “Eth2,” to Consensus Layer. The Beacon Chain will run on this Consensus Layer.
TL;DR
Regardless of whether the Merge occurs by September, Ethereum’s official roadmap still commits to merging with the Beacon Chain in 2022. And while the roadmap doesn’t specify September — that’s just the prediction of one developer — Ethereum emphasizes the smooth integration of the $19 billion Beacon Chain with Ethereum’s $182 billion mainnet.
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