What Is Ethereum Merge? Complete Guide on the Biggest Upgrade

To begin with, an important thing to remember is that initially, Ethereum (ETH) was envisioned as a “world computer” that would allow users to write decentralized applications (dApps) and enter into smart contracts with one another. To do so, the Ethereum protocol includes a virtual machine, which allows anyone to run Ethereum code on their computer. The EVM is turing-complete, meaning it can run any type of code theoretically. However, in practice, there are certain limitations to what can be run on the EVM due to its limited resources. And one of the ways to overcome these limitations is by creating a “merge” between the Ethereum blockchain and another blockchain that is more suited for a specific task.

For example, suppose you wanted to create a decentralized application that needed to handle a large amount of data. In that case, you could merge the Ethereum blockchain with a blockchain that is specifically designed to handle data storage, such as Filecoin (FIL).

What Is Merge In Terms of Blockchain?

The word “merge” itself has a variety of meanings in the business and technology worlds. But when it comes to blockchain, the term usually refers to combining two or more separate blockchain networks into a single, unified network. This can be done for a number of reasons, such as a need for increasing network efficiency or strengthening security. In some cases, a blockchain merge may also be used to rescue a struggling network by injecting new life into it.

One of the most famous examples of a blockchain merge was the so-called “5ive” merger in early 2018. This merge combined the networks of five different cryptocurrencies: Decred (DCR), Bitcoin (BTC), Litecoin (LTC), Vertcoin (VTC), and MonaCoin (MONA). The aim was to create a more robust and secure network. The 5ive merger was widely seen as a success, and we’ll see more blockchain mergers in the future.

So, what exactly happens during a blockchain merge? At its core, a blockchain merge is just a way of combining two or more existing blockchain networks into a single network. This process usually involves taking the best aspects of each network and combining them.

For example, let’s say that two different blockchain networks each have strengths and weaknesses. Network A might be more efficient but less secure, while network B might be more secure but less efficient. In this case, a merge between the two networks could result in a new network that is more efficient and secure.

Of course, a blockchain merge is not always as simple as just taking the best aspects of each network. A merge may sometimes be necessary in case a network is struggling. For example, if network A is on the verge of collapse due to low usage, a merge with network B could give network A the boost it needs to stay afloat.

When a blockchain merge is done to rescue a struggling network, it’s often referred to as a “bailout.” Bailouts are usually quite controversial, as they can be seen as a way of propping up a failing network at the expense of a healthy one. However, in some cases, a bailout may be the only way to save a network from total collapse.

Ethereum Merge: What to Expect

The much-anticipated Ethereum merge is expected to land within Q3/Q4 of 2022. The client developers are currently working to a soft deadline of September 19, 2022, but this could change depending upon the success of the final testnet merge (Goerli) that started in mid-August, continued client refinements, and the hashrate of the existing miners continuing predictably. Everyone is working hard to deliver the merge as soon as possible.

What this means for you depends on which version of Ethereum you own. If you own ETH, you will automatically receive an equal amount of ETC. If you own ETC, you can choose to keep your currency or exchange it for ETH. There is no right or wrong choice. It comes down to personal preference. If you believe in the long-term success of Ethereum, hold onto your ETH. If you want to cash out, exchange your ETC for ETH.

Either way, the merge is a big event for the cryptocurrency community. It’s a sign that Ethereum is continuing to evolve and grow and that it’s here to stay. So whatever you do, pay attention to the event and its aftermath. It’s sure to be an exciting ride.

Four primary changes are being made in the Ethereum merge:

1. The proof-of-work (POW) algorithm used to mine ETH will be replaced with a proof-of-stake (POS) algorithm.
2. The block reward for miners will be reduced from 3 ETH to 1 ETH.
3. The block size will increase from 1MB to 2MB.
4. A new fee structure will be implemented, whereby users will pay fees in proportion to their computational resources.

A merge is a broad and significant event for Ethereum and the crypto space. Because Ethereum is such a central part of the space, the upgrade could have implications for investors across the sector. For example, the new mining algorithm, ProgPow, is designed to be ASIC-resistant. This could lead to a more decentralized mining landscape, which would be good news for many Ethereum investors who believe centralization is a major problem in the crypto space.

Similarly, the scalability improvements enabled by sharding could make Ethereum more attractive to businesses and users looking for a blockchain platform that can handle high volumes of transactions. This could lead to increased demand for Ethereum and potentially higher prices.

Finally, the changes to the fee structure could reduce transaction costs on the Ethereum network, making it more attractive for users and businesses. This could also lead to increased demand for Ethereum and higher prices.

Let us also briefly talk about ETH2.0. ETH is the current cryptocurrency that runs on the Ethereum blockchain. ETH2.0 is the new cryptocurrency that will run on the Ethereum 2.0 blockchain (which will be created due to the fork). ETH2.0 will have a different POS consensus algorithm, block size, and fee structure to ETH.

Your ETH will remain on the Ethereum 1.0 chain after the fork occurs. However, you will also receive an equal amount of ETH2.0 on the new Ethereum 2.0 chain. For example, if you have 10 ETH on Ethereum 1.0, you will have 10 ETH on Ethereum 2.0 after the fork.

As we have said, you can simply ignore ETH2.0 and continue to use your ETH on Ethereum 1.0 as normal. However, it’s worth noting that eventually, all activity will move to Ethereum 2.0, and Ethereum 1.0 will become inactive. Therefore, it may be in your interests to start using ETH2.0 sooner rather than later.

Why Is Ethereum Merge Important?

There are several key reasons why merging is important for the Ethereum network and ecosystem.

1. Increased scalability. One of the biggest problems with Ethereum is its scalability issues. The network can only process a limited number of transactions per second, which has led to high transaction fees and long wait times during peak periods. With Ethereum Merge, the smart contract-dedicated chain would be able to process many more transactions, alleviating these issues.
2. Improved flexibility. Another benefit of Ethereum merge is that it would allow for more flexibility in developing dApps. All dApps must be built on top of the Ethereum blockchain, which can be limiting. With a dedicated smart contract chain, developers would have more freedom to experiment and build innovative applications.
3. Enhanced security. One of the main concerns with any blockchain is security. By splitting the Ethereum blockchain into two chains, security would be improved as there would be two separate networks to secure. This would make it more difficult for hackers to take down the entire network.
4. Reduced costs. Ethereum merge would also reduce costs for users. Currently, Ethereum transaction fees can be quite high, especially during periods of high network usage. With a dedicated smart contract chain, transaction fees would likely be much lower, making it more affordable to use dApps built on Ethereum.
5. Improved governance. One of the benefits of Ethereum merge is that it would improve the governance of the Ethereum network. Currently, there is no clear way to make decisions about the future of Ethereum. With a dedicated smart contract chain, there would be a more centralized decision-making process, leading to better overall governance.
6. Increased decentralization. One of the goals of Ethereum is to be a decentralized platform. However, with its structure, it is not completely decentralized. With Ethereum merge, there would be two separate chains with their own set of validators. This would increase the overall decentralization of the network and make it more resistant to attacks.

There are also some risks associated with Ethereum merge.

Firstly, the hard fork could result in a chain split, where the two chains operate independently. This could lead to confusion and chaos, as users must choose which chain to use. It could also result in losses for those who don’t switch to the new chain in time.

Secondly, there is always a risk that unforeseen security vulnerabilities could be exploited on either chain.

In addition, Ethereum merge could lead to centralization, as those who control the new smart contract chain would have a lot of power. This could eventually lead to the same scalability and flexibility issues that Ethereum is currently facing.

Overall, Ethereum merge is a risky but potentially rewarding proposition. Only time will tell if the benefits will outweigh the risks.

Getting Ready for the Upgrade

The merge is scheduled to happen between September 10th and September 20th. However, the exact date will be determined when miners start signaling support for the upgrade. Whenever it happens, you need to be ready. And if you want to receive ETH2.0 after the fork, you have to take action in advance.

First, you must ensure that your ETH is stored in a wallet that supports the fork. Some popular wallets that support the fork include MetaMask, Ledger, and Trezor. If your ETH is stored on an exchange, you will need to check with the exchange to see if they support the fork. You will likely need to do nothing if they are, as the exchange will handle everything for you. However, if they are not supporting the fork, you will need to withdraw your ETH from the exchange and store it in a wallet that does support the upgrade.

Once your ETH is stored in a supported wallet, you must deposit it into a smart contract on the Ethereum blockchain. This can be done using any Ethereum wallet that supports ERC20 tokens. The deposit process is fairly simple and only requires a few clicks. After your ETH is deposited into the smart contract, it will be locked up for a minimum of six months. After six months, you can withdraw your ETH2.0 from the smart contract and use it on the Ethereum 2.0 blockchain.

Bottom Line

Ethereum merge is a proposed update to the Ethereum network that would see the network split into two separate chains. The primary goals of the update are to improve scalability and security, though there are a number of other benefits that come with it as well. While the update is still in its early stages, it has garnered support from some of the biggest names in the space and looks poised to be one of the most significant updates to Ethereum so far.