Abstract

The Ethereum merger is part of Ethereum's transition from a proof-of-work blockchain to a proof-of-stake blockchain. Overall, Proof of Stake has many advantages in terms of scalability and sustainability.

As Ethereum migrates to its new sharding structure, the original mainnet state will also be migrated. This means that ETH holders do not need to do anything with their tokens and should be wary of scammers who claim to need to "transfer" their tokens.

Introduction

For many ETH holders, Ethereum’s long-awaited shift to a proof-of-stake consensus mechanism raises an important question: What do I need to do with my ETH holdings operate? This is a good question because if you don't fully understand the situation, the security of your funds could be at risk. First, we’ll explain to you why Ethereum is moving to Proof-of-Stake (PoS).

What does Ethereum’s shift to proof-of-stake mean?

Since the creation of Ethereum (ETH), to reach consensus on new transaction blocks, it has been using the same blockchain as Bitcoin ( BTC) same system, namely the Proof of Work (PoW) consensus mechanism. This consensus mechanism allows miners to reach agreement without a centralized authority, even in the face of malicious traders working against it.

The proof-of-work mechanism was first implemented by Satoshi Nakamoto in the Bitcoin network to provide a way to reach consensus in the decentralized network. An efficient and reliable method. To this day, the Bitcoin network has not suffered a successful attack.

However, the PoW consensus mechanism has gradually lost the favor of some developers and users. The main reasons are as follows:

1. Inefficiency of energy. PoW prevents bad traders from conducting large-scale attacks by increasing its energy costs. While this approach ensures network security, staking has now emerged as a more sustainable alternative.

2. Smart contractsare inefficient. The use of smart contracts may require extensive network interaction. These interactions must be added to the block and confirmed to the network. PoW consensus mechanisms tend to involve longer block times and higher transaction fees, which often make interacting with smart contracts slower and more expensive.

3. It is difficult to mine independently. Because the mining space is often dominated by a few large mining pools, it can be challenging for individuals to become a miner in popular PoW systems. This could lead to a centralization of mining rights, significantly reducing the competitiveness of individual miners or small mining pools.

4. Low scalability. When a blockchain network becomes more and more popular, the number of pending transactions will also grow. Since the block size of the PoW network is limited, it can only accommodate a certain amount of transactions. Therefore, during periods of high traffic, users may have to wait hours or even days for their transactions to be added to the block for processing.

With the arrival of Ethereum 2.0, the Ethereum network will migrate to the PoS consensus mechanism. and eliminates the need for coin mining. The move aims to increase Ethereum’s scalability and bring more benefits to users.

Why did Ethereum choose to move to proof of stake?

Proof-of-stake has proven to be the most popular among new blockchain networks. It offers several distinct advantages and leads the way in accessibility and scalability. Although Proof of Stake has some shortcomings, in most people's eyes, its shortcomings are insignificant compared with its advantages.

The path to advancement in Ethereum PoS

The transition from Ethereum to PoS cannot be achieved overnight. Ethereum started its transition to a new sharding structure a few years ago. This process can be divided into several stages. Please note that Ethereum officially no longer uses the phase structure, but it is still frequently mentioned in other media.

Launch of Beacon Chain (Phase 0)

In Phase 0, Ethereum will launch a PoS blockchain that manages all its shards, the Beacon Chain. Specifically, it will be responsible for organizing the validators and staking process, creating the validator committee, managing the consensus process, and running other key operations.

Introduction to Sharding Structure (Phase 1)

Phase 1 will take a single Ethereum blockchain and split it into 64 sharded blockchains. These blockchains will be managed by the Beacon Chain launched in Phase 0. However, over time, merging will occur before the sharding structure is implemented, so Ethereum focuses on merging instead.

Merge (Phase 1.5)

Phase 1.5, also known as the merge, aims to bridge the state of the Ethereum mainnet to the new proof-of-stake system. Smart contracts from the old Ethereum mainnet will be available on the new Ethereum network, and the Beacon Chain will become the official organizer of block production.

Phase 2

In Phase 2, fully functional shards will create new transactions and smart contracts. Phase 2 is the last phase of the original plan, while Phase 3 will be used to solve problems after the launch of Ethereum 2.0.

What will happen to the ETH I hold?

In short, Ethereum will keep your funds safe without you having to do anything. The complete Ethereum state will be automatically migrated to Ethereum 2.0. If you hold BETH due to ETH locked in Binance’s Ethereum 2.0 staking product, you will be able to exchange it for ETH soon after the merger is completed. Vitalik mentioned that the unlocking will take place approximately six months after the merger is completed. BETH is a wrapped token with an exchange ratio of 1:1 with ETH and is used to issue to users who have locked ETH on Binance. In this way, stakers obtain a liquid ETH-like asset that can be used while their funds are locked. Users can exchange their BETH back for ETH whenever they wish.

Expectations from users and the Ethereum community

For many people, Ethereum’s transition to a PoS consensus mechanism has been highly anticipated. With nearly all new blockchains now adopting PoS, Ethereum has been under intense pressure to catch up. The new PoS consensus mechanism brings many advantages to the Ethereum network, freeing it from previous limitations. Additionally, since PoS is more environmentally friendly, Ethereum will also remove its previous stigma of being energy inefficient. Overall, this helps to improve the overall image of the blockchain space.

Summary

What ETH holders need to know about the Ethereum merger The key message is that you don't need to do anything with the ETH you hold. Therefore, be wary of anyone claiming that you need to "move" or "bridge" your ETH to a new network. Once you get this right, you can enjoy the many benefits of Ethereum’s move to Proof-of-Stake.