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Ethereum 2.0 Merge | Hype vs Expectations

ethereum merge expectations

Ethereum 2.0 is on the horizon and long awaited Ethereum merge is soon to be expected. The merge is considered a major event in the crypto industry and is the most talked about and looked after event. In the article, we will see what to expect from Ethereum merge and Ethereum 2.0. What are the expectations from the merge and how is it going to affect the current Ethereum Ethers prices?

What is the Ethereum Merge?

Ethereum Merge is the change in the underlying consensus mechanism in Ethereum Blockchain where it will be shifted from proof of work to proof of stake consensus protocol. Currently, the Merge is scheduled in second half of September 2022.

The differences between proof of stake and proof of work consensus mechanisms can be summarized in the following table.

Proof of WorkProof of Stake
Miners Mine new blocks by solving complex hashing algorithmsThere are no miners, there are stakeholders who stake their crypto holding to verify transactions
Rewards are randomly distributed to miners who are able to solve crypto puzzlesStakeholders with more cryptocurrency earn more rewards

What happens to the original Ethereum blockchain history after the Ethereum 2.0 Merge?

After the Ethereum 2.0 Merge, the entire transaction history will be preserved and no data on the original chain will be lost.

  • No history will be lost
  • Funds are safe
  • No more mining of ETH

Ethereum will not remain a single chain and a new chain will fork out working on the PoS consensus algorithm.

What do you need to do if you are an Ethereum holder for the Merge?

There is nothing to be done by the existing Ethereum cryptocurrency holders. Everything is being done at the backend and end users will not feel a thing.

What are the Advantage of Ethereum 2.0 Merge?

The changes to the Ethereum protocol will have many advantages for the chain including higher scalability and efficiency which will help it compete with other chains like Solana. In the proof of stake consensus algorithm, stakeholders are incentivised to hold more currency which will have a positive effect on its price as well.

Moreover, Ethereum Energy consumption will plunge by more than 99% making it more eco-friendly than Bitcoin. The transactions will become faster and it will be able to process more transactions in a unit of time.

The possible Problems with Ethereum 2.0 Merge

The merge can cause many problems and the act effects can be measured only once the merge takes place and how people and the market respond to changes. A few of the possible problems that can be caused by Merge are as follows:-

1. DEFI lending market collapse

The merge can effect the DEFI markets which could be effected by sudden increase or decrease in demand of Ethereum.

2. Minimum Liquidity

People may withdraw funds from liquidity pools to be on the safe side and keep them in personal wallets which could result in DEFI markets slowing down and transactions not being processed due to a lack of funds in liquidity pools.

3. Uncertainty about Side chains/ layer-2 chains

The future of layer-2 chains is also unpredictable. Although developers have committed that everything will keep running as before. However, some side chains and layer 2 chains may become incompatible with Ethereum 2.0. The funds may be locked in old chains after Ethereum 2.0 Merge.

4. Exchanges going down

Exchanges can go down due to increases in supply and demand. Exchanges may not handle an increase in traffic due to hype.

5. Increase in Gas Fees

The hype and demand for the new Ethereum 2.0 can increase in volatility of Gas fees and sudden increase/ decrease in gas fees.

Conclusion

The merge is like Y2k. There are huge expectations from the merger. However, it is not without its risks and may cause some issues. Better is to be safe than repent in the future. We, hope the merge goes through smoothly and Ethereum comes out from the other side stronger than ever.

FAQ

What happens to Ethereum 2.0 original ethers after the merge?

The merge will not affect the original funds and funds will appear as new Ethers in your wallet.

What happens to the original transaction history after the merge?

The entire history of transactions will be preserved and no data will be lost.

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