The Merge Ethereum, What Impact Will It Have on ETH Miners and Holders?

Ethereum Merger and its impact on holders and ETH miners. (photo: doc. Unsplash)

JAKARTA – Ethereum will soon implement The Merge in its transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) mechanisms in mid-September. By switching to PoS, the ETH mining process will automatically stop.

“This merger represents merging the existing Ethereum execution layer (the Mainnet we currently use) with the new Proof-of-Stake consensus layer, Beacon Chain. This eliminates the need for energy-intensive mining and instead secures the network using staked ETH.

This is an interesting step that Ethereum developers are taking to better improve its scalability, security and sustainability. The PoW consensus mechanism itself is claimed not to be environmentally friendly. PoW supports mining activities using high-power computing devices including VGA and others. Therefore, do not be surprised if these activities consume high power.

Instead, the PoS mechanism only supports staking services. Where a user stakes or locks his crypto holdings for a certain period of time to validate transactions in the network. In this case, they are referred to as validators. After a certain period of time expires, they will get a reward in the form of crypto currency.

To do staking, users don't need to use high computing devices anymore. They only need to have cryptocurrency, in this context ownership of ETH. The Merge process from PoW to PoS will take place in the near future, starting with the launch of Beacon Chain.

“It is important to remember that initially, Beacon Chain was delivered separately from the Mainnet. The Ethereum Mainnet - with all accounts, balances, smart contracts and blockchain status - continues to be secured with proof-of-work, even when the Beacon Chain runs in parallel using proof-of-stake. An imminent merger is when these two systems finally come together, and proof-of-work is replaced permanently by proof-of-stake,” added the statement from the official Ethereum website.

Illustration of the Ethereum Merge process. (Ethereum.org)

Understanding Ethereum Merge Easily

To make Ethereum Merge easier to understand, ETH developers analogize the process as a plane:

“Let's consider an analogy. Imagine Ethereum is a spaceship that isn't ready for interstellar travel yet. With Beacon Chain, the community has built a new engine and a strengthened hull. After significant testing, it was almost time to swap out the old engine for the new mid-flight engine. It will incorporate new, more efficient engines into existing ships, ready to travel a few light years… and take on the universe.”

According to Ethereum, The Merge represents the official switch to using Beacon Chain as a block production engine. Mining is no longer a means of generating valid blocks. Instead, a proof-of-stake validator takes on this role and will be responsible for processing the validity of all transactions and proposing blocks.

Furthermore, Ethereum also announced that ETH holders do not need to do anything during The Merge process. In addition, the transaction history will not be lost. When the mainnet is merged with the Beacon Chain, it will also merge the entire Ethereum transaction history. In this case, the ETH owner's funds will remain safe. "You don't have to do anything. Your funds are safe,” according to Ethereum. On the other hand, there are also crypto exchanges that temporarily stop ETH withdrawals and deposits like Coinbase did.