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In Preparation for the Merge, Should You Stake Ethereum?

Ethereum

Throughout the years, mining cryptocurrencies was appealing to many people because you could earn revenue by employing graphics cards or unique mining hardware to solve complex computation tasks leaving you with the digital token reward from the blockchain network. Simultaneously, mining negatively impacted the environment because of the amount of electricity it consumed.

Cryptocurrencies like Ethereum or Bitcoin attracted other enthusiasts besides miners, especially after mining became linked to several mining farms and out of reach for most users. So, how to buy Ethereum was asked on Google much more than how to mine. To tackle environmental issues’ scrutiny and create a better version of the original network, Ethereum creators have been preparing the Merge for a long time.

The ins and outs of the Merge

The Merge is the most talked about topic in crypto circles and one of the monumental events in the short and dynamic history of cryptocurrencies and blockchain. So far, Ethereum was operating on the Mainnet as an execution layer and transactions were confirmed with the proof-of-work consuming enormous amounts of energy with mining. 

The Merge is transitioning from proof-of-work to a new proof-of-stake consensus layer and joining with the Beacon Chain, where this concept was tested thoroughly. Currently, the Mainnet, where all the user accounts, contracts and balances exist and are secured by proof-of-work, exists simultaneously with the Beacon Chain that uses proof-of-stake.

When will it happen

The Merge was in the talks for years and kept getting postponed. However, now there are some more precise insights on when the groundbreaking event. After Ethereum finished the Goerli public test net merge, it’s supposedly the final experiment. According to available information, Ethereum’s final Merge will happen on September 19.

What will change for Ethereum owners

The most impactful change will happen on the validation level. Instead of miners, the network transactions will be replaced by validators. You will have an execution, consensus client, and validator software. To create a new block, a validator with at least 32 ETH must submit votes and be careful about slashable penalties.

That doesn’t mean you can’t stake Ethereum unless you have 32. A role in a network will still exist for empty blocks, and you can also join pools. 

An important note for users is no history will be lost. Your funds are safe with the Ethereum network. So if you have Ethereum, you won’t have to do anything because the funds in a wallet will still be accessible.

However, if you are running a staking node, you will have to run a consensus layer client and execution layer. Authentication on those layers and setting a fee recipient address will allow you to get transaction fees.

Impact of the Merge

Ethereum mining has a high energy cost. And while those are lower than its most famous competitor Bitcoin, it was more than enough to raise eyebrows. After the Merge, Ethereum will lower energy output by more than 95%. 

Another benefit is further increased security. The Merge will deal with malicious users that try to exploit the network with slashing, a penalty system punishing malicious validators.

The Merge is the first in a line of Ethereum network changes. The next line is Sharding, a process that will divide the network into shards or smaller networks to allow the faster transaction, clear up congestion and lower the gas fees.

For now, the Merge won’t bring lower gas fees or faster transactions, but ultimately these changes will get an incredible speed increase. Estimates say that after Sharding, the Ethereum network could handle up to 100,000 transactions per second, a considerable uptick from 10-20 of the current state.

With more security, faster transactions and lower energy costs, Ethereum could attract institutional investors. But what about users that want to stake ETH now?

Should you stake Ethereum?

If you are worried the Merge might bring downtime to the network, Ethereum creators have already successfully tested networks merging several times. The Merge is designed to have zero downtime, and the network should keep working continuously outside of numerous changes. 

Since Ethereum will become deflationary, the shrinking supply and the same or more demand should result in higher Ethereum prices in the long run. With other security, and scalability benefits mentioned earlier, the outlook for ETH is looking bright.

There is currently over 13 million ETH staked on the network. For current validators, Ethereum set an exiting limit to 43,200 ETH per day, meaning there can’t be significant departures from the network once the Merge is completed. 

If you start staking Ethereum now, it could be wise given the future expert predict for one of the most popular cryptocurrencies. 

Watch out for scammers

After the Merge, it will be time for Ethereum 2.0. Outside of the network changes, users do not need to do anything with their ETH. This is important to state to avoid possible scammers that will offer conversion from ETH to ETH 2.0. Nothing needs to be done if you already have Ethereum to get Ethereum 2.0. 

The Merge will bring new challenges to crypto enthusiasts and will be a significant letdown for miners. However, a new, improved network will significantly improve security, gas fees, speed, and scalability in the long run.

Image: https://pixabay.com/illustrations/ethereum-currency-trading-3660218/

Opinions expressed by Coin Week contributors are their own.

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