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Ethereum Foundation debunks myths surrounding The Merge
The Ethereum Foundation, whose board includes the cryptocurrency’s co-founder Vitalik Buterin, has revealed that its upcoming transition from a proof-of-work validation system to proof-of-stake won’t lower transaction fees, increase trading speed or disrupt operations.
The much-discussed network upgrade, dubbed The Merge, is expected to take place before the end of the year. Developers are currently working to a soft deadline of 19 September 2022.
Controversy and confusion surround the project and as a result the Ethereum Foundation (EF) has shot down some common misconceptions popularised by news outlets and social media chatter, releasing a frequently asked questions (FAQ) article in relation to The Merge on its website.
The EF is a non-profit organisation dedicated to supporting Ethereum and related technologies. The EF does not control Ethereum, nor are they the only organisation that funds critical development of Ethereum-related tech. They’re part of a large ecosystem of organisations, individuals, and companies that back the cryptocurrency.
Misconception: “The Merge will reduce gas fees”
Gas refers to the unit that measures the amount of computational effort needed to execute specific operations, such as transactions and trades, on the Ethereum network.
Gas fees are calculated based on demand relative to network capacity. The EF asserted that transitioning from a proof-of-work system to a proof-of-stake consensus “does not significantly change any parameters that directly influence network capacity or throughput”.
Therefore, it’s unlikely that the costs of transacting on the network will change after The Merge is complete.
Misconception: “Transactions will be noticeably faster after The Merge”
The notion that the upgrade will improve the pace at which trades occur was also refuted by the foundation.
The speed of a transaction can be measured in a few ways, including the time it takes to create a new block on the blockchain (proof-of-work) and the time it takes to finalise or justify a transaction (proof-of-stake).
“Many decentralised applications (dapps) require a number of proof-of-work block confirmations that take a period of time on par with how long proof-of-stake finality takes. Finality can offer additional security guarantees, but will not significantly speed up transactions,” according to The EF's article.
Misconception: “The Merge will result in downtime of the chain”
There are a number of measures in place to prevent disruption to the Ethereum network during its transition to proof-of-stake.
The EF describes The Merge as being similar to changing an engine on a rocketship mid-flight. This means that it can be performed without the need to pause any operations during the switch.
The FAQ article declared that, “Ethereum does not have downtime”.
What is The Merge?
The Merge is like a changing of the guard for Ethereum’s network. The upgrade will alter the way transactions are validated on the blockchain.
Instead of having individuals competing to mine cryptocurrency (proof-of-work) in order to run the network and mint new coins - which consumes significant computational power to solve complex mathematical equations - transactions on the blockchain will be validated by owners of the underlying cryptocurrency (ETH) who can stake holdings (proof-of-stake) in order to power the network - requiring far less electricity consumption.
Source: The Ethereum Foundation.
The EF is clearly fond of space-related analogies and uses the launch of a spaceship to explain how The Merge will transpire (see image above).
“Imagine Ethereum is a spaceship that isn't quite ready for an interstellar voyage. With the Beacon Chain, the community has built a new engine and a hardened hull. After significant testing, it's almost time to hot-swap the new engine for the old mid-flight. This will merge the new, more efficient engine into the existing ship, ready to put in some serious lightyears and take on the universe,” the article explained.
Although The Merge may not discernibly enhance the network speed or reduce the cost of transacting with Ethereum, it will improve the cryptocurrency’s environmental impact and sets the stage for further scalability upgrades not possible under a proof-of-work consensus.
To learn more about The Merge, its potential implications and Ethereum’s energy consumption and sustainability goals, visit the Ethereum website.
Despite significant falls in value across the board, digital currency markets remain popular and continue to attract new investors. Intense volatility, reluctant real-world adoption and accessibility issues have emboldened consumer advocates to petition governments to regulate cryptocurrency markets.
If you're keen on investing or simply trying to understand how it works, check out our handy guide to cryptocurrency.
Disclaimer
This article is over two years old, last updated on August 19, 2022. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent cryptocurrency articles.
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