Ethereum 2.0: what will the “The Merge” update change?

Ethereum will over the next month change its consensus model, in an event closely watched by industry experts: The Merge. This event is expected to take place around September 15, when the Total Terminal Difficulty (TTD) will reach 58,750,000,000,000,000,000,000. The TTD represents all accumulated difficulty in the network. Once this difficulty is reached, the network will be ready to perform its update.

The operation constitutes a major turning point for Ethereum (ETH) and the world of crypto-assets. ETH is the second largest crypto-asset with around 200 billion in market capitalization. Unlike Bitcoin, which is intended to be a decentralized currency and resistant to government censorship, the goal of the Ethereum network is to build the financial infrastructure of tomorrow and allow anyone to create decentralized applications.

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Ethereum Notes

Source: The Merge TTD, Ethereum Notes

But then what will this update change for users of the Ethereum network?

Ethereum 2.0 marks the transition of the Ethereum blockchain from a Proof of Work consensus mode to that of Proof of Stake.

Until now Ethereum used the same mechanism as Bitcoin and other blockchains to validate transactions and blocks on its blockchain, proof of work (or “Proof of Work”). This consensus mechanism consists of using devices specialized in the mining (“mining” in English) of crypto-assets such as Asics, which will be required to solve mathematical problems in order to validate the next block and receive the associated reward.

In Proof of Stake, the user no longer needs to use these devices, which are sometimes criticized as being energy-intensive. On the contrary, the simple fact of holding ethers will allow any user to block their tokens on the network and secure the blockchain in order to obtain rewards in exchange.

But this project is not new. Several important phases have already taken place such as the launch in December 2020 of the “beacon chain” which has already been implemented and which is used as a consensus layer.

The Merge therefore represents the next step in the development plan for Ethereum 2.0. The expression “The Merge” is therefore used to describe the merger between the flagship chain (beacon chain) and the current Ethereum network which will thus move to a Proof of Stake model.

1662327904 748 Ethereum 20 what will the The Merge update change
Ethereum.org

Source: Ethereum.org

To make this clearer, we can make the following metaphor: imagine Ethereum as a car. For the moment the latter runs with a gasoline engine, but it will be replaced with the implementation of an electric motor instead. This is how we could roughly imagine the merger that will take place.

Despite the shift in consensus, Ethereum’s transaction history since genesis remains intact and unchanged following the transition to Proof of Stake. All funds held in a portfolio before the merger will therefore of course be accessible after the merger. No action is required from users to perform the upgrade.

As a user of the Ethereum network or holders of ETH, you will therefore have absolutely nothing to do on your side.

This update will bring two major innovations:

– A decrease in the energy consumption of the Ethereum protocol by around 99.95% according to the Ethereum foundation.

1662327904 744 Ethereum 20 what will the The Merge update change
Ethereum.org

Source: Ethereum’s energy usage will soon decrease by ~99.95%

– A network that will become deflationary (more ETH will be destroyed than created), which will probably have a positive impact on the price.

On the other hand, contrary to popular belief, this update will not reduce the transaction costs of the protocol.

The Merge will therefore be an important step for Ethereum 2.0 but it will not be the last. This update will then be followed by others such as the arrival of sharding (chain of fragmentation).

However, this update is not unanimous in the Ethereum community and some see this new step and the transition to a new consensus model with a negative eye. It is therefore not inconceivable that a hard fork (division of the main chain into two separate chains) will be carried out by certain members of the community, even if the majority of players in the Ethereum ecosystem seem for the moment to favor the version Ethereum Proof of Stake.

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Ethereum 2.0: what will the “The Merge” update change?


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