The Merge upgrade is Ethereum's long-awaited migration from its current "Proof-of-Work" system to a "Proof-of-Stake" system. The Merge will happen via a two-step process: Bellatrix followed by Paris. Bellatrix, which took place on Sept 6th 2022, is a network upgrade on the consensus layer. Paris will be the execution layer that will transition Ethereum from proof-of-work to proof-of-stake. Paris will be triggered by a specific Total Difficulty threshold, called the Terminal Total Difficulty (TTD).
The Merge is six years in the making and is considered by many to be a milestone in the history of cryptocurrency due to the potential material and philosophical implications. A merge like this is an incredibly rare event in crypto, and may never happen again.
For More: BFF Office Hours: The ETH Merge w/ Coinbase
Once complete, the already-running Beacon Chain will take over the process of validating new transactions through Proof-of-Stake and Ethereum's legacy Proof-of-Work model will be shelved permanently. To date, validators have already staked over 13 million ETH on the Beacon Chain. As the mainnet (the main network of the Ethereum blockchain) is merged with the Beacon Chain, the full transaction history of Ethereum, including every transaction, smart contract, and balance since July 2015, will also be merged.
The Merge will be triggered once the Terminal Total Difficulty (TTD) threshold is reached. TTD is the total difficulty threshold required of the final block mined in Ethereum. In other words, TTD represents the fixed number of hashes that are left to mine until Proof-of-Stake officially takes over.
Proof-of-Work uses computers across a decentralized network to verify transactions whereas Proof-of-Stake relies on validators that contribute their own token, in this case ETH, as collateral in exchange for a chance to update the block chain with the latest verified transaction and earn newly minted tokens.
Need more information about Proof-of-Work vs Proof-of-Stake? Check out Coinbase Learn on the topic and other crypto basics.
Ethereum is moving from Proof-of-Work (PoW) to Proof-of-Stake (PoS) in an effort to increase the blockchain’s security, make it less energy-intensive, lower barriers to entry by reducing hardware requirements, and lay the groundwork to improve scalability.
You can stake Ethereum using Coinbase. Coinbase offers our customers the ability to stake their ETH to earn rewards, and there is no minimum ETH required to stake on Coinbase. When you stake your ETH, it converts to ETH2.
The price of ETH2 is identical to ETH. Once the upgrade to the Ethereum network is complete, both ETH and ETH2 will merge into one token. Sign up for a Coinbase account and earn up to 3.28 APY when you stake your Ethereum. Asset availability and staking is subject to location.
In the short-term, The Merge is not likely to reduce gas fees because the upgrade is about a change in the consensus mechanism (the way Ethereum validates transactions), rather than an increase or expansion of its capacity.
In other words, The Merge will deprecate PoW and transition the blockchain to PoS, but this process is not expected to influence the blockchain’s capacity. Since gas fees are a byproduct of demand vs. network capacity rather than the way the blockchain validates transactions, The Merge won’t directly impact gas fees.
For More On The ETH Merge, Head Over to Coinbase.Com
This is not financial advice. If you don't want to spend money investing in crypto or Web3 — you don’t have to. The intent of this article is to help others educate themselves and learn.
