Let’s find out what the Ethereum Merge is and why it is so important!
Every year, Ethereum is gaining in popularity with users. However, the second-largest cryptocurrency on the market must meet the global need for speed, security, and sustainability if it continues to evolve.
ETH Merge 101
Ethereum’s update, called The Merge, is due to be launched on September 15, 2022. The Ethereum Merge is highly regarded as one of the most important events in the history of the crypto industry.
This update aims to make the Ethereum blockchain more energy-efficient, scalable, and decentralized. To achieve this, The Merge envisages changing the consensus algorithm from Proof-of-Work (PoW) to Proof-of-Stake (PoS), which will entail a change in ETH issuance. As a result, it will be at 1,600 ETH per day as staking rewards, i.e. ETH issuance will drop to 90% of current levels.
This reduction in emission levels will occur for Ethereum for the first time and will have a substantial long-term effect, coupled with last year’s EIP-1559 update. Currently, the amount of ETH being burned is between 900 and 2400 ETH, with an all-time high of around 71,000 ETH. As a result, the deflationary nature of ETH will be the fundamental basis for the future economics of the project.
In addition, as stated by the developers, the transition to PoS is necessary to further develop the Ethereum network: to improve scaling with sharding technology. The transition will also reduce the power consumption of the network by ~99.95%
As a result, Ethereum will become a much more energy-efficient blockchain, steering away from the negative sentiment. Analysts believe this could affect Ethereum’s popularity with institutional investors and spawn a new trend towards energy-efficient blockchains and a possible switch of other projects from the PoW consensus algorithm to PoS.
What does Vitalik Buterin say about the Proof-of-Stake model?
The creator of Ethereum believes that the PoS mechanism is much more efficient and secure than the previous PoW model. Due to the rather high entry threshold into the network (32 ETH), some intruders simply won’t be able to enter it, because they have to pay a significant amount of money (~$55,000) to do so. And without logging into the network, it would be more difficult to attack it.
Moreover, Vitalik thinks that in the long run Proof-of-Work might even become a threat to Bitcoin. When Bitcoin is fully emitted (21,000,000 coins) and the mining stops, the BTC network could lose the security the miners had previously guaranteed.
Merge FAQ: Top 5 questions answered
Q1: Will Ethereum suspend its network?
According to the core Ethereum developers, there is 0 expected downtime, as long as everything goes as planned.
Q2: Will the Merge create a new token?
The Merge will not represent the birth of a new token. The Merge simply represents an update to the current Ethereum network.
Q3: Will the Merge lead to a reduction in gas fees?
After the merge, the Ethereum network will go through a change of consensus, as sharding will be used to cut back on gas fees.
Q4: Will the Merge cause an ETH dump in the market?
The Merge doesn’t represent an immediate release of staked ETH. Stakers will gradually be allowed to withdraw staked ETH within a 6–12 months window.
Q5: Will Ethereum become more centralized after the Merge?
There is currently absolutely no evidence pointing to a deeper centralization of the Ethereum network after the event.
What does the Merge mean for FMFW.io users?
- FMFW.io will support the PoS fork if it survives. The final decision will be made after the fork.
- Spot trading will not be affected.
- ETH Merge is expected to happen sometime between September 10th and 20th (when ETH reaches TTD 58750000000000000000000), it will lead to the end of the proof-of-work (PoW) consensus mechanism in favor of proof-of-stake (PoS). The ETH and all ERC20 tokens deposits and withdrawals will be closed slightly before the merge and will be opened after the merge. The ticker ETH on FMFW.io will belong to the ETH PoS.
- We expect all tokens listed on FMFW.io to remain on the PoS chain or explicitly announce the move somewhere. Right now we are not aware of any tokens listed on FMFW.io that decided to support the PoW chain.
- The perpetual futures won’t be affected. We won’t halt or settle ETH’s future contract.
- We cannot guarantee anything about the downtime of ETH and ERC-20 tokens. We will try to minimize it if it exists.
- If there will be airdrops and the birth of new ETH currencies, we won’t support them until further notice.
- Staking functionality won’t be affected.
- Please note opening of new ETH short positions will be limited between Sep. 14 2022 and Sep. 15 2022.
- Swaps USDT ERC20 to/from USDT Omni/TRC20 will not be affected.
If you have any questions remaining feel free to reach out to our support team.
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