For over two years, Ethereum developers have been working on Ethereum’s massive software update, known as The Merge. As part of a multi-phased upgrade to address Ethereum’s security and scalability model, the upgrade with switch the Ethereum network from the Proof of Work (PoW) consensus to the Proof of Stake (PoS) model.
But what exactly is The Merge? How will Ethereum’s giant leap towards becoming a leaner and cleaner altcoin affect the investors? Should you invest in ETH 2.0?
An Introduction to Ethereum 2.0 and The Merge
Cryptocurrencies are often criticized for their energy and time-investive operations. But, despite the concerns, most altcoins skills operate on PoW models that require an array of high-end machines to solve complicated puzzles and mine new coins.
However, in recent years, the Ethereum network has been working towards adopting a more efficient and cleaner mining process called Proof of Stake. But, the massive transition does not happen overnight. For years, Ethereum developers have been battling bugs and hurdles. And finally, in December 2020, the network introduced ETH 2.0.
Ethereum 2.0, also known as serenity, is an upgrade of Ethereum’s blockchain. The primary motive of the upgrade is enhancing the network’s efficiency, speed, and scalability. The upgrade will allow faster and larger transactions along with easing obstructions.
However, the organization aims to rebrand Ethereum 2.0 as an upgrade and not an entirely new network. The company now identifies ETH 1 as the execution layer where the smart contract and network rules reside. Whereas ETH 2 is referred to as the consensus layer that’ll ensure that devices contributing to the network are acting according to Ethereum’s rules.
These two layers are expected to come together later this year in an event known as ‘The Merge.’
When will The Merge Happen?
Ethereum 2.0 is launching in three phases. Beacon Chain, the first phase of the upgrade went live on 1st December 2020. This phase introduced staking to the Ethereum blockchain. This is the key shift of the network from the PoW mechanism to the PoS consensus.
The second phase, named The Merge, will merge the Beacon chain to the Ethereum network. This massive software update, salted for 19th September 2022, will make the network substantially faster, cheaper, and more efficient to use.
The final phase would be The Shard Chains. This upgrade will play a key role in boosting the network’s scalability. Instead of settling all the operations on a single blockchain, the Shard will spread this operation across 64 different chains, thus reducing congestion.
By combining all these upgrades, operating the Ethereum node will be far simpler since there will be far fewer data to store. The complete upgrade is expected to be concluded by 2023.
Why Ethereum 2.0?
One of the primary reasons behind the Ethereum network’s upgrade is scalability. The current Ethereum network can only support a few dozen transactions per second. Thus causing a lot of delay and congestion.
However, ETH 2.0 promises up to 100,000 transactions per second.
Another major reason behind the upgrade is addressing the security issue. ETH 2.0 will have an approved set of validators that will make for a more centralized system and enhance network security.
However, for creating a PoS Ethereum network, at least 16,384 validators are needed. And experts fear that this might make the network much more de-centralized and compromise the security of the network.
What Does the Merge Mean for Investors?
The Merge will be the biggest launch in the crypto space since the launch of the De-Fi in summer 2020. The introduction of Ethereum into an asset that institutional investors are compelled to own. Experts believe it could also be the marker that inverses the bottoming process in the crypto market.
The crypto investors and enthusiasts are eagerly waiting for The Merge. However, despite the date announcements, many fear that the launch could still get delayed again.
“It has been announced in very similar wording six times before; ‘this is the one’ may just be hopium,”Hiesboeck, Uphold
But, since the announcement, Ether’s value has climbed almost 40%. Bitcoin and smaller altcoins have also followed the lead.
According to technical chart analysis by cryptocurrency, things do look fairly good for Ethereum. But it won’t be able to achieve a $1,700 value unless it can maintain a price of over $1,294 over the coming days or weeks.
Should You Invest in ETH 2.0?
Along with Bitcoin, Ethereum is considered one of the safest crypto investments. However, financial experts still caution you not to invest over 5% of your investment portfolio in cryptocurrency.
The crypto market is defined as the most speculative and risky asset class. Therefore, no matter how tempting ‘The Merge’ hype may seem, don’t invest any more money than you’ll be okay losing.