Ethereum’s network is switching from the Proof of Work (PoW) to the Proof of Stake (PoS) algorithm and is in its final testing stage. The upgrade called ‘The Merge’ is all set to change the working of the blockchain, with the aim to make the Ethereum blockchain less energy intensive. As controversy and confusion surround Ethereum’s transition to PoS, today we debunk some common misconceptions about The Merge.
Before we delve into the topic, here is a quick round-up of the new Ethereum upgrade. The Merge will take place on September 19. For context, Blockchain heavily relies on validators (crypto miners) to verify each transaction that occurs on the blockchain. For instance, if A sends Rs 1000 worth of crypto to B via the Ethereum blockchain, the transaction has to be verified before listing it on the blockchain database. For that purpose, validators run complex algorithms on energy-intensive computers. In return, they are rewarded cryptos for verifying hundreds and thousands of transactions that happen daily.
However, this process is energy intensive because validators have to run their computers for hours which requires electricity. With Ethereum switching to PoS, there won’t be any need to run devices rather one device can fulfil the requirement of verifying the transaction—but any individual who wants to be a ‘validator’ just has to stake some cryptos in the mining (staking) pool. This is called Staking.
Myth no 1: The Merge will reduce gas fees
Gas fees are transaction fee that has to be paid in order to use the Ethereum blockchain. According to the Ethereum Foundation, the organisation behind the Ethereum blockchain, The Merge will have no “significantly change any parameters that directly influence network capacity or throughput”. This means, there won’t be any change in the gas fees. It will all depend on demand and supply, when more people use the blockchain the gas fee charges will be high, when less use it, the fee will reduce.
Myth no 2: Transaction speeds will be faster
The transaction speeds won’t be any faster. These claims have been repeatedly denied by the Ethereum core developers. The speeds are going to remain the same because it depends on the app that utilises the blockchain, and not the chain itself.
Myth no 3: There will be downtime after The Merge occurs
An immense amount of work has been put into making sure the transition to proof-of-stake does not disrupt the network or its users. “The Merge is like changing an engine on a rocketship mid-flight and is designed to be performed without needing to pause anything during the switch,” as per Ethereum Foundation.
Myth no 4: Fees to create NFTs will be lesser
To mint (create) and NFT, transaction fees have to be paid to the Ethereum network. However, The Merge won’t have any effect on NFT minting fees. The switch to PoS “does not relate to fees”, an Ethereum developer said in a blog post.
Myth no 5: Staked rewards can be withdrawn after The Merge completes
Every validator who has staked his cryptos should note that staking rewards will be locked and they won’t be able to withdraw them until the Shanghai upgrade. It is the next major upgrade following The Merge. This means that newly issued ETH, though accumulating on the Beacon Chain, will remain locked for at least 6-12 months following The Merge.
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