The largest smart contract blockchain, Ethereum (ETH-USD), will kick off the final phase of its long-awaited “Merge” between September 13th-15th. Upon the completion of the Merge, Ethereum will officially transition from the Proof-of-Work (PoW) consensus mechanism to the Proof-of-Stake (PoS) consensus mechanism. Ethereum’s transition towards PoS began with the Beacon Chain in phase 1, which kicked off in December 2021.
Proof-of-Work (PoW) is the original consensus mechanism, first popularized by Bitcoin (BTC-USD). However, the PoW mechanism has faced criticism for its high environmental toll. PoW is extremely energy intensive compared to other consensus mechanisms, requiring high-end infrastructure and a steady electricity supply. Besides high-power consumption, the PoW process generates an immense amount of electronic waste once cryptocurrency mining rigs are discarded.
On top of that, PoW chains aren’t as scalable as their peers. The throughput of PoW chains like Bitcoin and Ethereum ranges around 5 to 10 TPS (transactions per second), which isn’t enough to cater to users who have grown accustomed to near-instantaneous transactions offered by centralized financial institutions.
The Ethereum community unanimously embraced the PoS consensus mechanism to overcome these limitations. PoS is designed to deliver speed and scalability without a massive environmental impact. Because PoS eliminates the competitive process of mining new tokens, it doesn’t require any high-end devices or infrastructure, resulting in lower energy consumption, less electronic waste, and fewer entry barriers.
In Ethereum’s case, the transition to PoS allows the blockchain to experiment with a new technology called “sharding,” which allows blockchains to split the entire network into smaller pieces to help increase scalability and throughput. The Ethereum development roadmap indicates that the network will receive subsequent updates to increase its capacity and speed after the Merge. While there is no definite timeline for sharding’s rollout, developers have hinted that it might begin sometime in 2023.
What Will Happen to Your Ethereum?
Since Ethereum rolled out the London hard fork in August last year, there has been a rise in the number of scammers trying to take advantage of users. With so much unfolding on the Ethereum chain, there are several questions about what will happen to the existing ETH (Ethereum) tokens and how this “Merge” will impact users. The Ethereum Foundation has already clarified that users holding ETH tokens won’t need to do anything.
Echoing the same claim, Luis Aureliano, a financial analyst, notes, “If you are an ETH holder, you don’t need to do anything. The beauty of the Merge is that it makes the monetary properties of ETH much stronger – a deflationary supply while at the same increasing the decentralization and security of the Ethereum network – while being totally transparent for users and developers.”
As Ethereum transitions from PoW to PoS, the entire transaction history of the Ethereum network since the “genesis block,” or the first block of the blockchain, will stay intact and unaltered. Accordingly, the ETH tokens held by users in their respective wallets will remain the same and will still be accessible after the Merge is completed.
In this context, it is critical to understand that tokens like ETH2, ETH2.0, and other similar-sounding variations don’t exist, and users don’t need to send their existing ETH tokens anywhere during or after the transition. Scammers, trying to take advantage of this knowledge gap, are trying to whip up a fury amongst ETH holders to scare them into swapping ETH for ETH2, which doesn’t exist.
In the last few months, there has been a surge in the number of phishing attacks, mining pool scams, fake airdrops, and even wallet support scams where hackers connect with hot wallet users as customer support representatives to steal seed phrases, passwords, and private keys.
DWF Labs Managing Partner Andrei Grachev explains, “Retail investors who hold Ethereum do not need to take any action as all transactions and assets on the blockchain will retain their information after the Merge. They should also be aware that there will not be any noticeable changes to interactions with their wallets or decentralized apps too.”
Highlighting the Merge’s security, Grachev stresses, “There should not be any security risks on the blockchain arising from the event, but retail investors should stay alert for any scams targeted at them as the Merge approaches. Some common scam tactics include email phishing links, giveaway scams, and fake ETH2 tokens that are airdropped to their personal wallets.”
