An Update on Merge of Ethereum’s PoW Model and PoS Model.

In the given scenario “Merge” means the joining of the Beacon chain, its new Proof-of-Stake consensus layer with its already existing execution layer, Mainnet, which has survived since its origin. This will result in elimination of energy intensive mining of Ethereum on the contrary to energy intensive mining techniques of Proof-of-Work. It is expected that this change will reduce the energy costs by 99 percent.

Why Merge now?

The sole reason why this change from PoW to PoS is being called “The Merge” is because in the initial stage, Beacon chain used to function separately from the Mainnet. Mainnet used to follow the PoW while Beacon chain, which ran simultaneously with Mainnet, used to follow PoS.

This conserves the history of the network, its components, and especially, alternates the consensus mechanism. 

The Beacon chain is responsible for coordinating data and producing new blocks via network validators; these validators with the help of economic incentives will secure the blockchain. 

This proves as an evidence that:

• The Proof-of-Work consensus mechanism is neither worth it nor rational, if we talk about the long run. 
• On the other hand, Proof-of-Stake consensus mechanism is accessible to a larger audience and not just the bigger players of the game.

Potential Risks Associated with This “Merge”

1. Denial-of-service (DoS) Attack Vulnerability

With the transition to PoS, the attacker already knows the network proposal, which makes the block vulnerable to the attack. This happens if the attacker is next in line to add a new block, they can attempt a DoS on the current proposer’s node and take that existing proposer’s slot for themselves along with access to all the transactions in the given slot.

2. Frauds and Malpractices

A number of crypto applications indicate “The Merged” network as “ETH 2”. This will lead the investors into believing that a new cryptocurrency will be introduced which will be called “ETH 2”. This confusion among the investors may expose them to scams and frauds. The scammer can manipulate the investor into believing that they are swapping the old ETH with ETH 2, but in reality, they’ll just steal the investor’s ETH and swap the original ETH with some other cryptocurrency.

3. Ethereum price drop

If the Merging of PoW and PoS results in significant drawbacks, then, it will have a direct negative impact on the price of Ethereum. Furthermore, these drawbacks will also cause the price of, all other cryptocurrencies based on Ethereum blockchain, to go down substantially.

Misconceptions about the “Merge”

1. 32 ETH are required to run a node

Everyone is allowed to sync their self-verified copy of Ethereum. ETH are never ever required to run nodes, neither before nor after the “Merge”

2.  The “Merge” couldn’t reduce the gas prices

Gas products are a product of demand of the network in relation to the network capacity. “The Merge” never planned on reducing the gas prices. It was the change in consensus mechanism not an expansion of network capacity.

3. “The Merge” allows the staking of withdrawal

This is not true, but staking withdrawals have since been enabled in the Shanghai/Capella upgrade. This upgrade allows the stakers to select a withdrawal address in order to receive the payout of excess staking balance.

Nancy J. Allen

Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.