The merger of Ethereum can be said to be the most important event in the history of Ethereum so far. The merger brings significant changes to the way the Ethereum blockchain works. Merges are strictly designed to change the way the Ethereum network reaches consensus.
In the blockchain world, consensus refers to how the blockchain generates and orders new block transactions. This article will take you through an in-depth look at Ethereum mergers.
What is a merger?
Merges are strictly designed to change the way the Ethereum network reaches consensus. In the blockchain world, consensus refers to how the blockchain generates and orders new block transactions. For example, Ethereum previously used proof-of-work (POW) to reach consensus, which required the network’s miners to use a lot of energy when “mining” new transaction blocks. Although very secure, POW is very energy-intensive and has poor scalability. The more people using the network, the more work it takes to execute a transaction, so POW is cumbersome, slow, and very expensive as a way of managing the transfer of value.
However, after the merger, Ethereum will adopt Proof of Stake (POS) as its new consensus mechanism. This means that instead of using an energy-intensive mining process to process new transactions, the blockchain simply selects validators based on how much they have staked on the network.
Although this merger is an important milestone for the Ethereum project, you probably won’t notice any significant difference in your day-to-day network usage. Mergers are not designed to scale Ethereum. It does not make Ethereum cheaper or faster to use. In a nutshell, the merged Ethereum will mostly be like the pre-merger Ethereum. However, there are some key security considerations to keep in mind when approaching a merger.
How to stay safe during the merge process
Beware of scams and fake accounts. Important events like mergers are a magnet for scammers trying to exploit FOMO and confusion to steal your private keys. However, here are some simple rules to keep you safe:
1. A 24-word recovery phrase (mnemonic) is not required for anything related to the merge.
2. Accounts or funds do not need to be migrated, transferred, synchronized or upgraded before, during or after the merger.
3. Also, beware of anyone who promises you an airdrop of ETH2 currency. Mergers are not airdrops. If someone promises you an airdrop, they are probably trying to scam you.
We recommend avoiding high-value transactions (ETH, tokens, and NFTs) during mergers. This is a safety precaution in case the merge is messier than expected. With this in mind, we look at the main benefit that the merger will bring to some Ethereum users: single betting.
ETH can be pledged after the merger
After the merger, anyone holding 32 or more ETH can hold their funds alone and become a validating node (or validator). Validators provide an important service to the network. They create new transaction blocks and validate blocks created by other validators. In return for their work, validators are rewarded with passive ETH paid in Ether directly to their accounts.
But there is a problem. Validation is a significant responsibility. Validators need to keep their nodes online and up to date at all times. Malicious validators who violate the rules of the network can even be penalized (slashed) by losing a large portion of their ETH stake. Also, the merger will not affect Lido and stETH, and you will continue to receive daily rewards as usual. Also, the price of stETH will continue to follow the price of Ethereum as before.
Collectively, the merger refers to ethereum’s much-anticipated shift from proof-of-work (POW) to proof-of-stake (POS) consensus. After multiple delays, the merger is finally scheduled to take place in September 2022. While the merger is a key stepping stone in ethereum’s scalability roadmap, it is unlikely to have a significant impact on how most people use ethereum anytime soon. Again, beware of scammers.
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