The Ethereum Merge is coming — here’s what will change (and what will stay the same)

Image credit: Shubham Dhage on Unsplash

An 8-year-long process which began back in 2014 is coming to a close — the so-called Ethereum Merge is almost completed. In less than one month, on 15 September, the Proof-of-Work (PoW) Ethereum Mainnet will merge with the Beacon Chain’s Proof-of-Stake (PoS) consensus layer, effectively marking one of the biggest milestones in blockchain history — Ethereum’s transition to a PoS model of operation.

This long-awaited event has sparked a lot of debate and, consequently, spawned a number of misconceptions and misunderstandings. In this article, we’ll try to clear the mist and see what is and what isn’t true about the Merge, and how, if at all, it affects other ERC20 tokens, namely — CHANGE.

Let’s get into it.

Why is the ETH Merge needed and what is its goal?

The transition to a Proof-of-Stake model has been planned for Ethereum ever since the network’s inception, and there are a number of reasons for it. The present PoW model of the Ethereum Mainnet has several drawbacks that stand in the way of institutional capital flows and large-scale adoption, and the Merge will solve some, but not all of them.

The Merge will preserve all of the data on the Ethereum Mainnet, including all of its history and functionality, so on the outside you can expect next to nothing to change. The large-scale changes will happen in the background.

The Merge: Problems and Solutions

Problem: Energy

The present PoW model of the Ethereum Mainnet is very heavy on the energy consumption side, and demands enormous amounts of electricity to function, resulting in a high environmental impact. According to some estimates, in a year Ethereum alone uses enough electricity to power up Finland for a period of 12 months. It goes without saying that this cannot be sustained in the long run, nor should it.

✔️ Solution: Staking

The Merge will eliminate the need for energy-intensive mining by passing the network’s security into the hands of stakers, who will in their turn use their ETH tokens to secure it. Ethereum is thus going green — the electricity consumption of the network is estimated to fall by ~99.95%, as stated by the Ethereum foundation.

Problem: Scalability

The Ethereum Mainnet falls back in terms of scalability as well, but it’s important to know that the Merge will not solve this issue, only pave the way for future upgrades which will address it.

✔️ Solution: Sharding

The scalability troubles of the Ethereum network will improve with the introduction of sharding — a breaking down of large datasets into manageable chunks that are processed by parallel chains, resulting in more transactions per second, better scalability, and reduced latency. In Ethereum’s case, these shards of data will be handled by a total of 64 parallel chains. Sharding is scheduled to arrive in 2023 and the Merge is what sets the mood for it.

❌ Problem: Security

Security is another thing to consider when it comes to the pre-Merge network. Currently, and as is the case with all PoW models, it would require a single miner to control 50%+ of the entire network’s computational power in order to be able to carry out an attack or in some way alter the data on the chain. The miners secure the network by using processing power to solve mathematical puzzles of increasing complexity, but this offers only one layer of security.

✔️ Solution: Proof-of-Stake

In a PoS mode of operation, stakers are the security mechanism itself, but instead of using computational power to secure the network, they use the network’s token, which is delegated to a protocol.

As such, an attacker would have to control at least 51% of the staking tokens and, at the same time, will also have to control 51% of the network’s nodes. This makes it all the more difficult to carry out an attack on the chain and security benefits greatly. Once the Merge is complete, staked ETH will be what secures the network.

These are the biggest and most important changes that the Merge will implement or begin to implement. But they do not exhaust the list.

How new ETH is issued

Before the merge, i.e. now, this is how the issuance of new ETH looks like:

Mining rewards: ~13,000 ETH/day pre-merge

Staking rewards: ~1,600 ETH/day pre-merge

After the merge has been completed, the numbers will accordingly change to this:

~1,600 ETH per day, dropping total new ETH issuance by ~90%

The burning of ETH will also change: at an average gas price of at least 16 gwei, 1,600 ETH is burned every day at the minimum, which will bring net ETH inflation to zero or less after the merge, as reported by the Ethereum foundation.

ETH Staking Rewards

Post-merge, the rewards for staking ETH will also rise — currently Beacon Chain stakers see rewards in the 3–6% range, while after the Merge they could rise to anywhere between 9% and 15%.

These are the main aspects that the Merge will touch on, paving the way for additional upgrades and implementations in the future.

Now let’s see what it won’t do.

Ethereum Merge Myths

Myth: The Merge will lower the infamous gas fees on the Ethereum Mainnet

✔️ Reality: No, it will not, because the Merge is a change to the consensus mechanism, and not an expansion in terms of network capacity. Fees have most likely been lower in the recent months because of the bear market and the weaker network activity on the Mainnet. For the fees to really fall, sharding needs to come into play, and this will happen at some point in 2023. Nevertheless, the Merge is an important step in that direction.

Myth: The Merge will make the network faster

✔️ Also not true. The network speed will largely remain the same, maybe slightly higher, but not enough to be worth the mention. Transactions will be executed at the same speed on the layer 1 network.

Myth: Stakers will be able to withdraw their staked ETH from Beacon Chain, tanking the price of the token by flooding the post-Merge network

✔️ No, withdrawals of staked ETH will not be available — this will come in the Shanghai upgrade to the network.

Myth: Two Ethereum networks will exist post-Merge

✔️ Only one network will exist after the Merge.

How will the Merge affect ERC20 tokens?

CHANGE is a multi-chain token which currently lives as an HRC20 token on HydraChain and as an ERC20 token on the Ethereum network, and the Ethereum version can be bridged over to the HydraChain via the Hydra Bridge.

That being said, the Merge will have no effect on the ERC20 version of CHANGE and everything will remain the same. As we said above, a misconception found around the web is that the Merge will result in the creation of two parallel Ethereum networks and, consequently, two iterations of ERC20 tokens — one for each network.

This is not the case — only one version of ERC20 CHANGE will exist and you can buy it, same as now, on Uniswap. Everything will stay the same.

And finally…

Having in mind all the changes that the Merge will introduce (and those it won’t), let’s see how it compares to the HydraChain, on which CHANGE is built.

Currently, HydraChain offers the following:

  • Same APY for all stakers, regardless of HYDRA amount staked.
  • Minimal computing power needed.
  • Environmentally-friendly mode of operation.
  • Accessible to everyone.
  • Strong decentralization through hundreds of nodes.
  • 100x more secure against “51% attacks” as compared to PoW.

The unique staking economy created for HydraChain guarantees a fixed income for all stakers. And also the following:

🔥 100% Burn of all Transaction Fees

💎 50% Royalty on Gas for Smart Contract Creators

📌 Fixed Coin Transaction Fees of $0.20

📌 Fixed Token Transaction Fees of $0.50

💰 20% Minimum APR Staking Income

📈 Up to 540 TPS Elastic Capacity, as compared to Ethereum’s 13 TPS

🔏 EVM Compatible Smart Contract Platform

⚙️ Wallet-Level Scalability

As we can see, HydraChain’s unique economy is already in a great position overall, which is why we chose to build on it. With the Merge almost upon us, and the Ethereum network catching up, we can only expect that CHANGE will benefit from the transition as more institutional capital and general interest flows into the network. Hence why we’re pretty happy to be both on Ethereum, and on Hydra.Which one do you prefer? Tell us in Telegram and follow us for regular updates on Twitter.

Thanks for your time. We hope you found this article useful.

The ChangeX team

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