Preston Van Loon – The “ETH Merge” will start in August
During the last Permissionless conference, Preston Van Loon – Representative of Ethereum’s development team – just said that “The Merge” event will take place in August if “everything is implemented on schedule”.
The Merge is the process of changing the consensus algorithm of ETH Blockchain, when the current Ethereum 1.0 blockchain (using Proof-of-Work, mining) moves to the Ethereum 2.0 blockchain (using Proof-of-Stake, staking coins) is under development. This is the most important milestone in the history of the Ethereum blockchain up to the present time. Adopting a change of consensus algorithm to PoS can both solve the problem of scale and reduce the environmental impact of mining.
The Ethereum 1.0 network currently processes around 1.3 million transactions per day. This is a huge number, which positively reflects the adoption and demand for the Ethereum network. However, this volume of transactions is exceeding the capacity of Ethereum because Ethereum was never intended to be a payment platform, but rather a platform for building smart contracts and decentralized applications (dApps). The result is lengthy transaction times and potentially very expensive fees when conducting transactions on the Ethereum 1.0 platform.
Ethereum 2.0 is a major overhaul of the Ethereum protocol that aims to solve some of the core problems with the original protocol and make Ethereum “more scalable, more secure, and more sustainable.” The upgrade to Ethereum 2.0 will significantly improve the transaction speed of the network, from 15 TPS to around 100,000 TPS. The upgrade will also reduce gas fees from the current $3-$70 to less than $1 and reduce the energy usage of the Ethereum network by 99.95%.
How will the move to PoS mechanism affect investors? The price of ETH can be affected by a lot by market cycles, regulations, news and rumors… however historically, solid assets like Bitcoin and Ethereum have generally appreciated after major releases or important updates.
During this conference, Van Loon also told 5,000 attendees that the team is currently still figuring out how to make the transition before the “difficulty bomb” is activated.
The “Difficulty Bomb” is a mechanism that increases the difficulty of mining ETH over time, forcing miners to no longer profit from this activity and switch to Proof-of-Stake transaction validation. This is one of the important tools to accelerate the consolidation process.
However, in the event that The Merge is not ready by then, the Ethereum developers still do not rule out the possibility of a delay or an upgrade event, or a difficulty bomb, or even both.
If The Merge is successfully implemented in August, the last milestone Ethereum needs to hit is Eth2, which is an upgrade that is expected to go live as early as 2023. However, until now. Thereafter, the Ethereum network will continue to use layer 2 blockchains such as Polygon and Optimism to handle scalability and transaction volume.