Martin Souto Parga
September 14, 2022
The transformation process of the Ethereum network will take place this September 15th. All transactions will be suspended on the most important blockchain in the crypto world.
Yesterday the last update phase of the Ethereum network was activated before "The Merge" happens, it consisted of the “ Bellatrix phase ”, which triggers the merger process with the update of the node operators.
Ethereum, is the blockchain network that creates the second cryptocurrency with the largest market capitalization, it will go through one of the most important evolution processes in the crypto world since its existence. “The Merge”, as it was called, will imply reforms regarding how transactions are carried out, applications are created, smart contracts are issued, and ETHs are generated. The changes aim to make the network cheaper, more scalable, and more environmentally friendly.
These transformations have been happening since September 6th. One of the most relevant changes has to do with the change from a Proof of Work (PoW) protocol to a Proof of Stake. “Currently, each operation in the network suppose the sending of an amount of ether from one person to another and it requires the participation and consensus of distributed nodes (the blockchain) powered by miners, which certify and record the transaction using mathematical exercises and a lot of computational power”, explains the main cryptocurrency exchange, Binance.
“The Merge”, ethereum will stop the “mining ” and “validators” will then be in charge of registering operations. Advances have shown that this system consumes less electrical energy - and therefore reduces the carbon footprint. It is superior in terms of preventing hacking, fraud, or duplication. In addition, it promotes the decentralization of the system, an objective of special relevance for the crypto world.
This change will imply a more scalable network. “The consensus protocol that Ethereum is about to adopt, promises faster transactions and more agile processes. It will be easier for the network to summon the vast participation of validators compared to the current effort that involves integrating more and more miners; this will have to be reflected in the growth of the network and its uses, ”explains Binance on his portal.
Major exchanges expect to make announcements about how “The Merge” will impact the various products on the network after the process occurs. This is because some of the consequences of the merger are unknown, or could lead to different outcomes.
Ethereum could be divided into two different networks, something known as a "fork". In that case, ETH (the acronym that currently identifies the network's tokens) will refer to the new chain. That token, however, will have to go through a listing process to be published on some platforms.
According to the Ethereum team, any hard forks during The Merge will be unofficial. If an “unofficial” fork occurs, Binance will release more details about the token distribution in a future announcement.
After the update, it is very likely that the speed of the transactions will be similar to the current one. The changes will not be noticeable to the average user. Ethereum gas fees will remain the same for now, but there is a possibility that they will be cheaper in the future.
Instead of miners, people who stake Ethereum will help protect the network. Stakers will not be able to withdraw their staked Ethereum for six to 12 months after “The Merge.”
In principle, the holders and users of the Ethereum network should not do anything, although they should be alert to the suspension of some services in the network until the merger occurs. Let us go over the most used crypto exchange in the industry Binance and how they will manage the activity. Should you manage a different exchange make sure you do your due diligence.
“Binance will suspend deposits and withdrawals of ETH and ERC-20 tokens approximately on September 6 for the update of the Bellatrix consensus layer and on September 15 for the update of the execution layer Paris”, they reported. They warned users to allow enough time for their token transfers to be processed before the suspension.
If a new token is not created, Binance will then reopen ETH and ERC-20 token deposits and withdrawals “as soon as possible.” On the other hand, if it is split into two opposing chains and a new token is created, platform users will see the emerging token credited in a 1:1 ratio according to the snapshot of ETH balances before the update. of the execution layer Paris.
“In order to protect Binance users, all emerging tokens will undergo a strict review process for listing, just as Binance does with any other coin or token. Due to internal policy, Binance does not guarantee listings,” they reported.
Liquidations will continue to be enabled under extreme conditions of price volatility. Binance reserved the right to update the suspension time for ETH cross and isolated margin lending and to adjust ETH lending interest rates, with or without notice. In addition, users with obligations in ETH must return the token that arises from the fork in the case of scenario B.
Proof of Work, the algorithm currently used by bitcoin and from which ethereum will migrate, has some disadvantages, such as the consumption of electrical energy. From now on, the tokens will not be mined, but there will be validators in charge of registering the operations in the blockchain, a more decentralized system.
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