What ‘The Merge’ of Ethereum Won’t Fix

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What ‘The Merge’ of Ethereum Won’t Fix

With extraordinary developments in the operation of Ethereum, ‘The Merge’ seems to be getting closer and closer. Where several layers of Ethereum (Mainnet) will merge with the new Proof-of-Stake consensus layer called the ‘Beacon Chain.’ 

In this process, staked ETH will be used to validate transactions in order to avoid energy intensive mining.

It all sounds good but ‘The Merge’ won’t fix everything ‘wrong’ with Ethereum. Today we take a look at some misconceptions of the Ethereum Merge. 

After ‘The Merge’ gas fees will reduce

First of all, The Merge changes the consensus mechanism (from Proof-of-Work to Proof-of-Stake). This does not mean it will lower gas fees. The price of the fees are a result of the network demand relative to the capacity of the network efforts. Beware!

Running a node requires staking 32 ETH

You can run a node with no ETH required. The only difference is that you can’t run a node that validates and proposes blocks. Anyone can sync their own self-verified copy of Ethereum i.e. run a node.

After ‘The Merge’ transactions will be faster

The upgrade could change transaction times very slightly. But the average speed of the transaction will mostly remain the same. Meaning the time to include the transaction in a block or finalize it will not change noticeable.

You can withdraw staked ETH

Not yet, withdrawals of staked ETH are not yet enabled. This will happen after some time when ‘The Merge’ is finalized – and when the Shanghai Upgrade is completed. Meaning staked, newly issued ETH and rewards will still be locked without the ability to withdraw.

When withdrawals are enabled, stakers will exit at once

With a built- in feature, validator exit rates are limited for security reasons. Where only six validators may exit per epoch. With an epoch every 6.4 minutes, meaning a cap of only ~ 43,200 ETH a day can leave the system. 

Validators don’t receive any liquid ETH untill Shangai upgrade

Validators can receive fee tips/MEV that will be credited to the validator’s Mainnet account. Because the ETH for fee tips/MEV is already on the execution layer and not newly issued by the protocol. Given a proper fee recipient address validators will have access to earned ETH.

After ‘The Merge’ the ETH staking returns are expected to triple

This is probably not the case. Estimations of the increase of the Annual percentage return – APR are closer to 50%. This is calculated from a reallocation of transaction fees that will start going to validators instead of miners.

When ‘The Merge’ happens, the chain will experience downtime

This is not true, because ‘The Merge’ upgrade is specifically designed to transition to the new Proof-of-Stake model with zero downtime. The transition will not disrupt the Ethereum network and transactions.

Are you interested in learning more about Ethereum? Visit our Ethereum page here on YourCryptoLibrary. Think ‘The Merge’ will affect the price of Ethereum? Trade Ethereum here or stake and validate Ethereum 2.0.

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