What is "the merge"?
The Merge is an Ethereum upgrade that marks the end of Proof of Work for the network, and the full transition to Proof of Stake. That transition is the merge of the Execution layer (the mainnet we use today) of the network (running under proof of work) and the Consensus layer, known as the Beacon Chain (running under Proof of Stake).
This change ditches traditional mining – meaning having powerful computers solve math puzzles to run the network and create new coins – and switches to a system where owners of the underlying currency, ether or ETH, can stake it (hence proof-of-stake) in order to power the network.A truly exciting step in realizing the Ethereum vision – more scalability, security, and sustainability.
When will the Ethereum merge happen?
It happens when the terminal total difficulty(TTD) is reached, this TTD has been set to 58750000000000000000000 and is expected to happen around Sept 15th. (could happen between September 13th - 15th). You can countdown to the Merge here.
Why is the Ethereum merge happening?
According to the Ethereum Foundation, since its inception, Ethereum has aimed to implement a proof-of-stake consensus mechanism, but doing this without compromising Ethereum's vision of being a secure, scalable, and decentralized blockchain has taken years of research and development. Therefore, the network started by using proof-of-work consensus and then started to prepare a set of upgrades. They have been active in the areas of research and development since 2014.
The Ethereum merge is one step in a series of staged upgrades to make the blockchain more scalable and sustainable. The Merge will unlock sharding and is expected that the Shard Chain upgrade will give Ethereum room to breathe by reducing congestion and improving transaction speed. They also expect to improve security as the transition to proof-of-stake means that the Ethereum protocol has greater disincentives against a 51% attack. And finally, Ethereum estimates energy savings from the switch to PoS to be around 99%.
Why is the Ethereum merge important?
The Merge represents the end of Proof-of-Work for Ethereum and starts the lists of upgrades that the Ethereum Foundation expects to create a more sustainable, and eco-friendly Ethereum. This will also set the stage for further scalability upgrades not possible under Proof-of-work.
- Energy Reduction: The Merge will see Ethereum completely shed proof of work, the energy-intensive system it currently uses, in favor of proof of stake, and electricity expenditure will go down an estimated 99.65%, according to the Ethereum Foundation.
- Scalability: While the Merge will not immediately solve challenges with scalability, it will help prepare the network for Ethereum’s version of subsidiary shard chains that will rely on a fully functional PoS network to operate. Through spreading the data load of the network across 64 chains, this will continue to reduce network congestion and increase transactions per second.
- Ether Issuance: How ETH gets issued will change at the time of The Merge. Currently, new ETH is issued from two sources: the execution layer (i.e. Mainnet) and the consensus layer (i.e. Beacon Chain). After The Merge, issuance from the execution layer will go to zero.
Because of The Merge, total new ETH issuance might drop by ~90%, according to the Ethereum Foundation, resulting in Ether becoming deflationary. That means it will become scarcer over time.
Will the Merge affect Bitso users?
Our customers that hold ETH or ERC20 tokens at Bitso, don’t need to do anything before nor during The Merge. Funds held in their Bitso wallets before The Merge will be accessible after The Merge. No action on our customer’s part is required for this upgrade.
Only as a precautionary action, commonly adopted by the industry, deposits and withdrawals of ETH and ERC20 tokens will be paused for a period of time during the merge until we can verify that everything is properly working. We will inform our community via our status page when deposits and withdrawals are enabled again.
What would happen to my existing ETH balance?
Nothing will happen to ETH balance funds. Funds held on Bitso wallets before The Merge will be accessible after The Merge. No action on our customer’s part is required for this upgrade. Crypto assets on Bitso will remain safe and secured.
How will you be informed of changes during and after the Merge?
We will provide status updates through a variety of channels, including our social media and mainly our status page.
After The Merge, will the ETH name change?
The merge per se is not changing the existing assets. There is actually no new ETH asset associated with The Merge. Your existing ETH will work just as it always has and be unaffected.
The term 'Eth2' is being phased out in preparation for The Merge.
After merging 'Eth1' and 'Eth2' into a single chain, there will no longer be two distinct Ethereum networks; there will only be Ethereum.
To limit confusion, the community has updated these terms:
- 'Eth1' is now the 'execution layer', which handles transactions and execution.
- 'Eth2' is now the 'consensus layer', which handles proof-of-stake consensus.
These terminology updates only change naming conventions; this does not alter Ethereum's goals or roadmap.
Will Bitso halt deposits and withdrawals before and during the merge?
As a precautionary practice, and as a common practice, ether (ETH) and ERC20 tokens deposits and withdrawals transactions will be briefly paused. We anticipate transactions to be paused about 2 hours before the merge activation and transactions will resume within 2-4 hours after the upgrade depending on the state of the blockchain. We will be closely monitoring the event.
We will provide status updates through a variety of channels, including our social media and status page.
How is Bitso preparing for the merge?
We started planning a couple of months ago and currently, we’re working in three work streams: technical, business and users. Our teams have taken extensive preparations for the Merge, researching, testing, and preparing for multiple scenarios before, during, and after the merge happens.
We are researching and monitoring changes and updates on a daily basis. Our teams have been working to prepare our infrastructure to support the change to Proof of Stake (PoS). We also tested the infrastructure readiness for the Merge on the Ropsten test network. The PoS transition of the Ropsten network went smoothly for Bitso and we did not encounter any issues.
Our team is prepared to take the necessary steps to mitigate any possible impact, such as disabling deposits and withdrawals short before, during, and after the merge to avoid windows of possible disruption.
From a product perspective, we have launched ETH at Bitso+ and now you can receive yields for your ETH.
How is Bitso monitoring possible scenarios of the Merge?
Bitso is closely monitoring all possible outcomes from the Merge. Including but not limited to a technical failure of the Merge event, and an unofficial Ethereum hard fork. We are researching and monitoring changes and updates on a daily basis.
What is a fork? What will happen with EthPoW?
A fork happens whenever a community makes a change to the blockchain’s protocol or basic set of rules. When this happens, the chain splits — producing a second blockchain that shares all of its histories with the original, but is headed off in a new direction.
If a fork happens, that would create two different versions of Ethereum that run in parallel: proof of work and proof of stake. At a high level, the PoW fork will be an exact duplicate of the main Ethereum chain, where the state of the original chain, meaning transaction history and token balances, is preserved. But that does not mean that in a forked Ethereum, all money will suddenly duplicate: tokens are only worth as much as the market dictates.
Only if a chain split happens and it prevails, customers would have the possibility of having double tokens since they will be entitled to the value of their ETH balance in the Proof of Work split chain. We will be monitoring possible chain splits and evaluating market conditions to communicate to our users any further action needed in case of a chain split.