Busted: Five Myths Around the Merge
If you are even remotely clued into the blockchain and Web3 ecosystem, chances are that you have heard of the Merge. It is the most significant upgrade to a blockchain network in the history of our nascent industry.
The Merge is the culmination of years of coordination by Ethereum Core Developers, client teams and researchers and will reshape the world’s largest programmable blockchain. To understand the magnitude of this upgrade, consider an analogy. The Ethereum network is a car running on a gas engine, but instead of providing motion to the car, Ethereum’s engine provides security to the entire network. As part of an upgrade, the automotive engineers decide that they want to replace the gas engine with a more efficient electric one, reducing the car’s carbon emissions by 99.95%. They also want to make the switch while the car is running full throttle, and do so in such a way that the driver will not even realize that the engine was switched. This is what the Ethereum CoreDevs are hoping to achieve through the Merge. The Ethereum network will switch from the energy-intensive Proof of Work (PoW) consensus mechanism to the Proof of Stake (PoS) mechanism, with no downtime to the Ethereum network and no impact to or action required from end users or developers.
As with any upgrade of this massive scale, misconceptions around the Merge abound. Here we clear the air on five such Merge myths:
Merge Myth 1: The Merge Will Create Another Blockchain Called Ethereum 2.0
The Merge refers to a set of technical upgrades to the existing Ethereum network. It will not create a new network or a blockchain, but will make the current Ethereum network more energy efficient, more secure, and in the future, more scalable.
The term Ethereum 2.0 was coined in 2018, when separate upgrade plans, including those to increase the decentralization capacity of the network and to transition to the PoS mechanism, were combined under one roadmap. This roadmap was called Ethereum 2.0.
This referencing created the confusion that Ethereum 2.0 was a new blockchain. To clear this confusion, the Ethereum Foundation in January this year said that they would phase out this terminology. Instead, the layer running the historic state of Ethereum and block production is now called the execution layer, and the layer running PoS is called the consensus layer. The Merge refers to the event when these two layers will merge, effectively ending PoW and transitioning the Ethereum mainnet fully to PoS.
Merge Myth 2: The Merge Will Create a New Ethereum Token, ETH2
Another result of the Ethereum 2.0 terminology was the idea that the Merge will create a new token, ETH2, and the existing ETH tokens will become worthless after the Merge. This is simply not the case.
The most important upgrade that the Merge will enable is the move from carbon-hungry PoW to the energy-efficient PoS consensus mechanism. Under this mechanism, validators need to stake their ETH to validate a transaction and add it to a block. In December 2020, the Ethereum CoreDevs began testing the PoS mechanism on the Beacon Chain, and called it ETH2 in the Ethereum roadmap.
Some scammers have even tried to con people into swapping their ETH tokens for fake ETH2 tokens. One such scam surfaced last week where hackers targeted victims by impersonating Infura and offering a malicious ETH2 staking service with high rewards. Infura does not currently offer any staking products.
Merge Myth 3: ETH Transactions Will Cost Less Post Merge
Many ETH users believe the Merge will reduce the cost of transacting on the Ethereum network, by lowering mainnet gas fees. While this may happen over time when sharding is enabled, the Merge simply swaps an energy-intensive PoW system for a carbon-neutral PoS system.
To understand this, think of the Merge as an upgrade to the Ethereum backend. It does not target gas fees, but is aimed at making the network more secure and lay the foundation for eventually scaling it. However, the front-end experience of the user remains the same.
The move to PoS will have profound impacts on the aggregate cost of securing the network, which will no longer be required to issue significant new ETH to compensate miners for their computing costs. But the Merge does not specifically address individual transaction costs, which remain a function of demand. The higher the number of people transacting on Ethereum, the higher is the gas fees. And vice-versa. In fact, gas fees have fallen to their lowest level in two years as network activity has dropped in the current market downturn.
In the long run, however, the Merge can make Ethereum transactions more cost-effective by making Ethereum easier to scale. A successful Merge will enable the next upgrade outlined in the Ethereum roadmap, sharding. Sharding is the act of splitting a network’s data into smaller portions to ensure easy storage of the data and avoid network congestion. Sharding is expected to be enabled in 2023 and will allow the Ethereum blockchain to process more transactions faster.
Merge Myth 4: Validators Who Have Staked Their ETH on the Beacon Chain Since 2020 Will Be Able To Withdraw It Immediately After the Merge
When the Beacon Chain launched in December 2020, validators were allowed to stake their ETH on it to test the chain. The ETH, however, is locked, which means that the validators cannot withdraw that ETH for other purposes.
It is a common misconception that this locked ETH will become available for withdrawals as soon as the Merge is successfully implemented. In reality, validators will be able to take out their ETH at a particular, yet unspecified time after the Merge. While the CoreDevs are yet to decide on a date to enable withdrawals on the Beacon Chain, it is estimated to be at least 6-12 months after the Merge.
Merge Myth 5: The Merge Will Hamper the Security of the Ethereum Network
The origins of this myth around the Merge can be traced back to the debate between the respective supporters of the PoW mechanism and the PoS mechanism about which is more secure.
While both consensus mechanisms have their pros, the Merge will make Ethereum securer and safer. According to some estimates, hacking a blockchain running on the PoS mechanism will cost about 10-20X more than one operating on a PoW mechanism.
A key way through which the Merge enhances the security of Ethereum is by democratizing network participation. By ensuring that single-node validators get the same chance at earning rewards as a whale stake, PoS will lead to further decentralization of the Ethereum network.
In addition, it is difficult for a malicious actor to amass the 51% tokens required to launch an attack. Apart from being incredibly expensive to acquire that 51% stake on the network, it will be difficult to convince that many stakers to part with their stake. Currently, it will cost nearly $940,000 to launch a 51% attack on the Ethereum network for an hour.
Even if a bad actor manages to launch a 51% attack on the Ethereum network, the cost to sustain that attack will keep increasing because of a mechanism called slashing. If a validator attacks the network, their staked ETH will be burnt and their access to the network will be revoked. The attacker will effectively have to keep putting in more ETH, which will keep getting burnt, to sustain.
Keep Up With the Merge
For regular updates on the Merge, and how ConsenSys is contributing to it, visit our Merge Knowledge Base. You can also find the key milestones achieved in the Ethereum roadmap on the knowledge hub, along with other essential resources for validators, developers, and enterprises interested in the Merge. Follow us on Twitter to keep up with the latest news on the Merge and ConsenSys.