Even Google has launched a countdown function for the Ethereum merger (The Merge), one can imagine how hot this event is.
As the old saying goes, what is The Merge? Simply put, it is the process of [merging] the current main network of Ethereum and the beacon chain. In this process, the current proof-of-work (PoW) mechanism used by Ethereum will be replaced by the proof-of-stake (PoS) mechanism.
On December 1, 2020, the Ethereum beacon chain was officially launched. This is a brand new PoS chain, but there are no transactions, no tokens, and no applications on the chain. It is an "empty blockchain". After the merger, nothing on the Ethereum network (accounts, balances, smart contracts, state, etc.) will change, only PoW is replaced by PoS.
It's like a train in motion, the locomotive is changed midway, but the carriages are not changed.
Ethereum developers have been preparing for this moment for several years. They have done a lot of preparatory work, developed several test networks (Ropsten, Goerli, Sepolia, etc.), and have undergone many design changes and several upgrades to pave the way. With less than 24 hours left before this moment, this article will review this milestone event again.
First, how will the market react?
Ethereum mergers are a known event. It is expected that the upgrade will be completed smoothly, but it is not ruled out that there will be errors in the upgrade process, but this possibility is not very high. After all, 13 shadow forks have been successfully carried out before, and the merger of various testnets has also been successfully completed.
Bullish view: If the Ethereum merger is successfully completed, community confidence will be enhanced, and ETH will be bullish in the short term. In the long run, the merger is also good for ETH, because the issuance speed of ETH will be greatly reduced after the merger, the daily new issuance will be reduced by 90%, and the annual inflation rate is expected to drop from about 4.3% to about 0.43%. Many people even believe that in the case of high fees, the destruction of fees brought by EIP 1559 will even cause ETH to enter deflation, thereby pushing the price of ETH upward.
Bearish view: People who previously bought ETH in advance to obtain potential Ethereum fork tokens may sell after the fork is completed, which is negative for ETH. In other words, if all the benefits are exhausted, it will be empty.
Preparatory measures
You don't have to do anything, the entire merge process is seamless and you won't notice any changes. But if you want to get potential Ethereum fork token candy, then remember that only ETH on the Ethereum mainnet has fork tokens, and the following forms of ETH cannot get fork tokens:
1. ETH on the Layer2 network. If you want to get forked tokens, you need to withdraw from Layer2 before merging, including zkSync, Optimism, Arbitrum, StarkNet, etc.
2. ETH on a CEX that does not support forked tokens. If you put your ETH on an exchange and that exchange does not support the forked token, then you may not get the forked token after the merge. Pay attention to the announcement of the exchange you use.
3. Pledge ETH like stETH. If you hold stETH, then you will not be able to get the fork token airdrop. Therefore, this may also affect the price of stETH before and after the merger, and the arbitrage space may expand.
4. ETH deposits in DeFi apps.
Some relevant information collation:
CEX
OKX: If Ethereum is forked, the forked coins will be airdropped in proportion
Binance: If the Ethereum fork produces a new chain, it will support the distribution of forked tokens
FTX: After the merger of Ethereum, it will evaluate whether to distribute forked tokens
Coinbase: Will Evaluate Ethereum Forked Tokens in Merger Policy Update
South Korea's five major crypto exchanges will support ETHW fork coins after Ethereum merger: Upbit, Bithumb, Coinone, Korbit and Gopax
Layer2
zkSync: zkSync V1 will be paused hours before the merge
Optimism: The network will not be interrupted during the merger. Once The Merge is launched, Optimism's operations will be completely transferred to the PoS chain, and assets on Optimism will only be withdrawn to the PoS chain.
DeFi applications
DeFi applications
Opyn: Support Ethereum merger, no plan to support other forks
Uniswap: Does not support any Ethereum forks, will function normally during the merge
Yearn Finance: Ethereum PoW fork is not supported, and the old version of Yearn treasury permission function is risky
AAVE: Forks are not supported, only PoS chains are supported
NFT
X2Y2: Will permanently suspend smart contracts on the Ethereum fork chain ETHW
LooksRare: Ethereum PoW fork chain will not be supported
mining pool
Bitfly: Ethermine will close the ETH mining pool on September 15th and will not provide a dedicated mining pool for PoW forked coins
wallet
wallet
Argent: No plans to support any Ethereum forks
DeBank: All products do not support Ethereum fork chain
infrastructure
infrastructure
Chainlink: Protocols and services do not support Ethereum PoW and other forks
What to expect after the merger
PoW networks such as Bitcoin and Ethereum have been criticized for being environmentally unfriendly due to the large amount of energy required to mine them, which has become one of the biggest barriers to adoption. After switching to PoS, Ethereum no longer needs to face this problem, and the energy consumption of Ethereum will be reduced by 99.95%. Only a computer connected to the Internet is required to participate, and professional mining machines are no longer required.
In fact, aside from the benefit of reduced energy consumption, several of the most concerned issues will not be combined to solve:
Merger cannot reduce network fees: Merger changes the network consensus mechanism and cannot expand network capacity, so it will not significantly improve the network fee situation. The problem of layer 1 expansion needs to be solved by the implementation of sharding in the future.
The transaction speed of Ethereum Layer 1 will not be greatly improved: the transaction speed remains almost unchanged, and the block generation speed remains at 12 seconds (about 13 seconds under PoW), so ideally there will be a small increase in transaction speed.
Staked ETH still cannot be unlocked: After the merger, the ETH previously pledged by the user to participate as a validator cannot be unlocked immediately. The withdrawal function will only be enabled after the Shanghai upgrade is completed, which is expected to be 6-12 months later. Even so, it is predicted that after the merger, the APR of user pledged ETH is expected to increase by 50%.
While the merger won't solve several of Ethereum's most pressing problems (fees, speed), the transition to PoS marks a huge achievement for the Ethereum community and the entire DeFi ecosystem, thanks to the years of hard work of the researchers, developers and developers behind it. The milestone achievements of the authors. This is a critical step towards a greener, efficient and scalable Ethereum.
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