What is the Ethereum Merge?

The Ethereum Merge is a multi-year event designed to upgrade the blockchain from a proof-of-work to a proof-of-stake consensus mechanism.

How does proof-of-stake help Ethereum?

Proof-of-stake (PoS) helps Ethereum reduce its energy usage to that of a small town. It is the critical next step toward global scalability.

What is the Beacon Chain, the phase 0 of the ETH Merge?

As the name suggests, the Beacon Chain is a parallel PoS side chain to Ethereum’s existing PoW blockchain.

It serves as a record keeper of all transactions of the Ethereum mainnet.

Think of the new chain as a relay runner. It is waiting for its turn to take the baton but needs to be running at the same speed before the official handoff.

What are the Ethereum testnets?

Ethereum testnets are blockchains that simulate the Ethereum mainnet but have lower mining complexity and testnet ETH fees.

Once there are enough successful testnet merges, the core team will schedule the merge of Ethereum mainnet and the Beacon Chain.

What is the difficulty bomb, and how will it freeze proof-of-work on Ethereum?

However, this procedure doesn’t turn off proof-of-work with a flip of a switch. Theoretically, miners will have a window where they could continue a proof-of-work fork on Eth1 client(s).

To address this, the core team created a solution to freeze PoW. They call it the difficulty bomb, and it is the most contentious element of the Merge.

The difficulty bomb is code developed in 2016 that rapidly increases the difficulty to mine a block on Ethereum, eventually making it economically infeasible to mine ETH using the PoW protocol.

If the developer community times it just right, it will incentivize miners to abandon PoW.

The only problem is that the community can’t agree on the timing.

Strong proof-of-stake advocates believe they should deploy the difficulty bomb early to expedite the Merge, and others think that will push the developer team too fast, increasing the chance of mistakes. The difficulty has been delayed various times.

What will happen after the Merge?

If transaction volumes continue at current rates, ETH is expected to offer a better yield to its stakers. The base APY number seems to fluctuate between 8% and 12%.

Why is the Ethereum merge so important?

Ethereum’s scalability problem is an existential risk. Although Ethereum currently has a network effect and a vast community on its side, it needs to address these problems to retain them.


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