Skip to main
Emma avatar
Emma
@emmaz
•

The Ethereum Merge: What You Need to Know

If you’re a crypto investor or follower, you’ve likely heard of the upcoming Ethereum Merge, which reflects a significant upgrade to the Ethereum blockchain. Here’s a breakdown of the major crypto event.

What is happening to Ethereum?

The long-awaited Ethereum Merge is currently in progress and is expected to be completed between Sept.13-16. The Merge is a shift in how users validate transactions within the Ethereum ecosystem from the current “Proof-of-Work” system to “Proof-of-Stake.” The Ethereum Foundation best describes the move as “swapping the new engine for the old mid-flight.” The Merge is just one piece in a series of planned evolutions to the Ethereum blockchain outlined by its co-founder Vitalik Buterin.

Why The Shift?

The shift is an effort to move Ethereum away from high energy consumption, which is often cited as a defect in the “Proof-of-Work” system.

  • Proof-of-Work: Validates transactions based on a republic of user computers solving complex computations in a process called “mining.” If a computer succeeds at validating a transaction, they are rewarded with cryptocurrency of that ecosystem. This is the mechanism that Bitcoin ($BTC) runs on.

Within the Proof-of-Work system, total computing power controls the direction of transaction validations. Mining computers have been upgraded over the years to compete for transaction validation and now requires an immense amount of computing power to accomplish validation. Currently, Ethereum consumes 76.58 terawatt per year using this system. The energy consumption of Bitcoin and Ethereum together surpass the total annual usage of many countries, with Ethereum making up 36% of combined usage. This is expected to change under a Proof-of-Stake system.

  • Proof-of-Stake: Utilizes cryptocurrency instead of computing power to run validations in a process called staking. Staking allows users to put up their crypto currency for a chance to validate transactions themselves. If a user is chosen to validate a transaction, they are rewarded with cryptocurrency.

With cryptocurrency now the focal point for validation, the users with the most ecosystem-based cryptocurrency will have the most sway in the ecosystem, and will focus on gaining crypto instead of computing power. The Ethereum Foundation stated that power consumption will decrease by 99.5% on the new Proof-of-Stake system.

What to Know for the Upcoming Merge

Owners of Ethereum or crypto assets that run on the Ethereum blockchain do not need to do anything prior to the merge, according to the Ethereum Foundation. The Ethereum chain itself will not pause during the transition.

The merge impacts the Ethereum blockchain; however, this is different from its native crypto asset, Ether ($ETH). Investors in ETH should not expect any disruptions to ETH trading during the Merge event.

Upon the completion of the merge, the rate of new Ethereum tokens will decrease by 90% as staking rewards are much lower than mining rewards. Ethereum gas fees and transaction speeds will experience no change upon merge completion.

Post-Merge Potential Outcomes

Upon the completion of the merge, more updates are planned in the future with a mission to improve the ecosystem for project developers and users. During a recent Crypto Club show on Public Live, Gil Luria, Technology Strategist at DA Davidson, explained that as planned technology add-ons and updates occur, it will allow for an Ethereum Network that can scale faster, have lower transaction costs, and therefore become an even more dominant layer 1 solution for other applications to build upon.

Although many crypto analysts view the merge as a significant first step towards a better Ethereum Network, some onlookers have identified risks that could stand in the way of Ethereum’s progress. One challenge cited is the possibility of an update failure. Merge flaws could lead to inoperability of the Ethereum chain and could severely impact the price of Ethereum, as well as other Ethereum based assets. Secondly, some analysts have pointed out that obsolete Proof-of-Work users may create an Ethereum fork. This would create an entirely new cryptocurrency and could cause users to choose between the two related networks. All scenarios regarding the post-merge period are speculative at this point.

--

*This information is for educational purposes only and is not investment advice.

#crypto #cryptocurrency #eth #eth2

Sources:

Ethereum foundation: Merge Information

Digiconimist.com

CoinTelegraph.com

65
0
Own your future.
Build your portfolio.

All of your investing.
All in one place.

Invest in stocks, treasuries, ETFs, crypto, and alternative assets on Public. Transfer your account to Public and get up to $10,000.
Sign Up
Products
Contact Us
Check the background of this firm on FINRA’s BrokerCheck.
Open to the Public Investing, Inc. Customer Relationship Summary

© Copyright 2023 Public Holdings, Inc. All Rights Reserved.

Market data powered by Xignite.

All investments involve the risk of loss and the past performance of a security or a financial product does not guarantee future results or returns. You should consult your legal, tax, or financial advisors before making any financial decisions. This material is not intended as a recommendation, offer, or solicitation to purchase or sell securities, open a brokerage account, or engage in any investment strategy.

Product offerings and availability vary based on jurisdiction.

Stocks and ETFs.
Brokerage services for US-listed, registered securities are offered to self-directed customers by Open to the Public Investing, Inc. (“Open to the Public Investing”), a registered broker-dealer and member of FINRA & SIPC. Additional information about your broker can be found by clicking here. Open to Public Investing is a wholly-owned subsidiary of Public Holdings, Inc. (“Public Holdings”). This is not an offer, solicitation of an offer, or advice to buy or sell securities or open a brokerage account in any jurisdiction where Open to the Public Investing is not registered. Securities products offered by Open to the Public Investing are not FDIC insured. Apex Clearing Corporation, our clearing firm, has additional insurance coverage in excess of the regular SIPC limits. Additional information can be found here.

Alternative Assets.
Brokerage services for alternative assets available on Public are offered by Dalmore Group, LLC (“Dalmore”), member of FINRA & SIPC. “Alternative assets,” as the term is used at Public, are equity securities that have been issued pursuant to Regulation A of the Securities Act of 1933 (as amended) (“Regulation A”). This content is not investment advice. These investments are speculative, involve substantial risks (including illiquidity and loss of principal), and are not FDIC or SIPC insured. Alternative Assets purchased on the Public platform are not held in an Open to the Public Investing brokerage account and are self-custodied by the purchaser. The issuers of these securities may be an affiliate of Public, and Public (or an affiliate) may earn fees when you purchase or sell Alternative Assets. For more information on risks and conflicts of interest, see these disclosures. An affiliate of Public may be “testing the waters” and considering making an offering of securities under Tier 2 of Regulation A. No money or other consideration is being solicited and, if sent in response, will not be accepted. No offer to buy securities can be accepted, and no part of the purchase price can be received, until an offering statement filed with the SEC has been qualified by the SEC. Any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of acceptance given after the date of qualification by the SEC or as stated in the offering materials relating to an investment opportunity, as applicable. An indication of interest to purchase securities involves no obligation or commitment of any kind.

Crypto.
Cryptocurrency execution and custody services are provided by Bakkt Crypto Solutions LLC (NMLS ID 1828849) through a software licensing agreement between Bakkt Crypto Solutions LLC and Public Platform LLC. Bakkt Crypto is not a registered broker-dealer or a member of SIPC or FINRA. Cryptocurrencies are not securities and are not FDIC or SIPC insured. Bakkt Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. Please ensure that you fully understand the risks involved before trading: Bakkt Crypto Disclosures.

Treasuries.
U.S. Treasuries (“T-Bill“) investing services on the Public Platform are offered by Jiko Securities, Inc. (“JSI”), a registered broker-dealer and member of FINRA & SIPC. See JSI’s FINRA BrokerCheck and Form CRS for further information. When you enable T-Bill investing on the Public platform, you open a separate brokerage account with JSI (the “Treasury Account“).

JSI uses funds from your Treasury Account to purchase T-bills in increments of $100 “par value” (the T-bill’s value at maturity). T-bills are purchased at a discount to the par value and the T-bill’s yield represents the difference in price between the “par value” and the “discount price.” Aggregate funds in your Treasury Account in excess of the T-bill purchases will remain in your Treasury Account as cash. The value of T-bills fluctuate and investors may receive more or less than their original investments if sold prior to maturity. T-bills are subject to price change and availability - yield is subject to change. Past performance is not indicative of future performance. Investments in T-bills involve a variety of risks, including credit risk, interest rate risk, and liquidity risk. As a general rule, the price of a T-bills moves inversely to changes in interest rates. See Jiko U.S. Treasuries Risk Disclosures for further details.

Investments in T-bills: Not FDIC Insured; No Bank Guarantee; May Lose Value.

Banking services and bank accounts are offered by Jiko Bank, a division of Mid-Central National Bank, Member FDIC.

JSI and Jiko Bank are not affiliated with Public Holdings, Inc. (“Public”) or any of its subsidiaries. None of these entities provide legal, tax, or accounting advice. You should consult your legal, tax, or financial advisors before making any financial decisions. This material is not intended as a recommendation, offer, or solicitation to purchase or sell securities, open a brokerage account, or engage in any investment strategy.

Commission-free trading of stocks and ETFs refers to $0 commissions for Open to the Public Investing self-directed individual cash brokerage accounts that trade the U.S.-listed, registered securities electronically during the Regular Trading Hours. Keep in mind that other fees such as regulatory fees, Premium subscription fees, commissions on trades during extended trading hours, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Open to the Public Investing’s Fee Schedule to learn more.

Fractional shares are illiquid outside of Public and not transferable. For a complete explanation of conditions, restrictions and limitations associated with fractional shares, see our Fractional Share Disclosure to learn more.

View Full Disclosures