It’s not surprising that the buzz and anticipation around the long-awaited “Merge” continues to grow. Could this herald the end of the crypto winter? Will the lower supply of ETH, and potential higher demand for ETH 2.0 drive the price up after the Merge? Like you, we’re eagerly waiting to see what happens.
TL;DR: Ethereum is expected to move to proof-of-stake around September 15th, 2022, and many are hopeful that the transition could increase the cryptoasset’s investment potential. No action is required, and all of your assets held on eToro will remain secure during this period.
After six years of focused development, Ethereum is almost ready for its most significant upgrade yet: The Merge. The technical milestone will help Ethereum to overcome its scaling limitations and has left investors pondering a big question: could this upgrade spark a crypto market resurgence?
What is The Merge?
The Merge is Ethereum’s shift from proof-of-work to proof-of-stake.
Specifically, it is the ‘merging’ of two independent blockchains that are currently running in parallel: the existing execution layer of Ethereum (the Mainnet we use today) and the new proof-of-stake consensus layer, the Beacon Chain.
When will The Merge occur?
Ethereum is currently expected to complete the Merge around September 15th, 2022.
This date was targeted following the successful Merge of the final Ethereum testnet, Goerli, on August 10th, 2022.
Why is The Merge significant?
Proof-of-work and proof-of-stake are the two main consensus mechanisms used to verify transactions and add blocks to the blockchain. Ethereum is currently based on proof-of-work (the same consensus mechanism as Bitcoin) but has long been planning to move to proof-of-stake.
The Merge will finalize the transition to proof-of-stake and completely eliminate proof-of-work mining on Ethereum. In the process, it’s expected to reduce Ethereum’s energy consumption by more than 99% — alleviating environmental concerns and potentially making the cryptoasset more attractive to certain investors.
In addition, The Merge is expected to reduce the issuance of new ETH and make the cryptoasset more deflationary. This is because the expensive mining process of proof-of-work, which requires Ethereum to issue significant amounts of ETH to pay the miners, will be replaced by staking. The result will be a reduction in the amount of new ETH issued, from 4% to around 0.5-1%. Given the right market conditions, this could boost the cryptoasset’s value.
Finally, The Merge is also expected to help unlock more use cases and drive more investment in Ethereum. Although it won’t immediately lower gas fees or increase transaction speeds, it should lay the technical foundation for the blockchain to continue delivering on its scalability roadmap and overcome the bottlenecks that, until now, have curbed widespread adoption.
How will The Merge impact eToro users?
If the Ethereum network becomes unstable, eToro may temporarily pause Ethereum (ETH) and ERC-20 token deposits and withdrawals. If this happens, and any eToro services are affected, we will communicate under separate cover.
Will eToro support an Ethereum fork?
As the Merge represents a hard fork for Ethereum, it could potentially result in a new blockchain and new forked tokens. eToro will evaluate any potential forks on a case by case basis. As always, if and when forks do occur, eToro will communicate with our users under separate cover.
To stay updated on the progress of The Merge, follow eToro and the Ethereum Foundation on Twitter.
Cryptotrading is offered via eToro USA LLC. Securities trading is offered via eToro USA Securities Inc. (“The BD”), a broker-dealer registered with the Securities and Exchange Commission (SEC). The BD is a member of the Financial Industry Regulatory Authority (FINRA) and Securities Investor Protection Corporation (SIPC). eToro USA LLC (NMLS ID: 1769299 ) is not a registered broker-dealer or FINRA member and your cryptocurrency holdings are not FDIC or SIPC insured. Our full disclosures page is here. Our fees page is here. eToro USA. © 2022