Ethereum Merge: 5 Things You Need to Know

Ethereum Merge: 5 Things You Need to Know | PRECOG FINANCE

Major updates within the crypto industry do not occur very often. For a space that’s still in its infancy, and with over a trillion dollars of digital assets at stake, it only makes sense for major changes to take years to develop and reach the desired state. This meticulous process also lays down a solid foundation for the future of finance and the decentralized web, and while it may take a while, at the very least ensures steady and smooth sailing towards a new and promising horizon.

Ethereum’s transition to a Proof-of-Stake blockchain may be one of the most significant events in the blockchain space of the decade — certainly the biggest event we’ve seen in years. It’s the first blockchain network of its size to do so, and will undoubtedly change the course of the industry and leave an impact for years to come.

Ethereum Merge from proof-of-work to proof-of-stake. Source Ethereum.org

With that being said, let’s take a look at 5 things you need to know when it comes to Ethereum’s forks and the upcoming merge.

1. Ethereum Classic

Ethereum Classic (ETC) is perhaps the most famous Ethereum hard fork in the market and has persisted since 2016. It was created after the events of the DAO hack where nearly $150,000,000 worth of ETH tokens were stolen. A debate sparked to fork the network and revert the chain, which gave birth to Ethereum Classic in the process, who were against the said proposition.

While Ethereum is transitioning to a Proof-of-Stake consensus network, Ethereum Classic seems to have no such plans, and will instead proceed as Ethereum has been thus far, as a Proof-of-Work network that utilizes miners to discover new blocks.

2. ETHPow

While there’s already an existing Ethereum fork that is running on PoW, a potential new fork is in the making that disagrees on an entirely different matter. ETHPow (ETHW) is an idea that’s backed by various Ethereum miners, as well as figures such as Justin Sun, the founder of the Tron network.

When Ethereum completes the merge, it will essentially render all current ETH miners useless. There are a handful of other networks that can utilize GPU mining for their PoW consensus, but none pay as well as Ethereum, practically halting multi-billion dollar mining operations around the world. As such, hard forks like ETHPow come into being, albeit with questionable validity and usefulness for users and non-miners in general.

3. Energy Usage

Ethereum is the second-largest energy consumer in the blockchain space, consuming a whopping 112TWh per year. That is comparable to small states such as the Netherlands, and as we’re all familiar with by now, has by no means a positive implication in an eco-conscious age.

The merge will eradicate that figure, however, and shrink it down by 99.5%. The only devices that will contribute to Ethereum’s energy consumption after the merge will be node operators, and given their relatively low energy demands, could be powered sustainably by renewable energy sources such as solar or wind.

4. Token Supply

One thing that tends to get overlooked is the impact of the merge on the ETH token supply. As of pre-merge, 13,000 ETH is created per day as mining rewards, with an additional 1,600 ETH as staking rewards. This translates to around 5,329,000 tokens being introduced to the total supply per year.

After the merge, however, only the staking rewards will remain, slashing the inflation rate by a staggering 90%. Paired with the burn mechanism, inflation for the ETH token could hit very close to zero — if not become deflationary.

5. Gas Fees

It’s a common misconception that the Ethereum merge will reduce gas fees since it will no longer rely on miners to find new blocks; however, that is simply not the case. While it’s true that the network will require less raw power to add new blocks, the changes that will be made to the protocol do not affect network capacity and therefore, will likely remain the same post-merge.

The upgrade responsible for lowering network fees will be the Sharding upgrade, which is planned for roughly a year after the merge takes place. Until then, users will have to bear the heavy weight of hefty gas fees due to the sheer demand and congestion created by users and institutions alike.

Are you looking forward to the merge? Have you ever mined any ETH yourself? Let us know about your experience with the Ethereum network!

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