{"id":479598,"date":"2022-07-29T16:03:00","date_gmt":"2022-07-29T13:03:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/ethereum-merge-how-will-the-pos-transition-impact-the-eth-ecosystem\/"},"modified":"2022-07-29T16:03:00","modified_gmt":"2022-07-29T13:03:00","slug":"ethereum-merge-how-will-the-pos-transition-impact-the-eth-ecosystem","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/ethereum-merge-how-will-the-pos-transition-impact-the-eth-ecosystem\/","title":{"rendered":"# Ethereum Merge: How will the PoS transition impact the ETH ecosystem?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a25783ba516d\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a25783ba516d\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/ethereum-merge-how-will-the-pos-transition-impact-the-eth-ecosystem\/#%E2%80%9D_Ethereum_Merge_How_will_the_PoS_transition_impact_the_ETH_ecosystem_%E2%80%9C\" >&#8221; Ethereum Merge: How will the PoS transition impact the ETH ecosystem? &#8220;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/ethereum-merge-how-will-the-pos-transition-impact-the-eth-ecosystem\/#Merges_impact_on_the_Ethereum_ecosystem\" >Merge\u2019s impact on the Ethereum ecosystem<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/ethereum-merge-how-will-the-pos-transition-impact-the-eth-ecosystem\/#Does_the_Merge_make_Ethereum_a_security\" >Does the Merge make Ethereum a security?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_Ethereum_Merge_How_will_the_PoS_transition_impact_the_ETH_ecosystem_%E2%80%9C\"><\/span>&#8221; Ethereum Merge: How will the PoS transition impact the ETH ecosystem? &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<div class=\"post-content\" data-v-28d77a7a>The Ethereum blockchain is on the verge of one of the most crucial technical updates since its inception, moving from proof-of-work (PoW) to proof-of-stake (PoS), also called Ethereum 2.0, or Eth2.\u00a0<\/p>\n<p>Ethereum devs gave Sept. 19 as the perpetual date for the merger of the current PoW chain to the PoS chain. The Merge is expected to be deployed on the Goerli testnet in the second week of August. After the successful integration of the Goerli testnet, the blockchain will initiate the Bellatrix update in early August and roll out the Merge two weeks later.<\/p>\n<p>The discussion around the transition began with a focus on scalability, so Ethereum developers proposed a three-phase transformation process. The transition itself is nearly two years in the making, starting on Dec. 1, 2020, with the launch of Beacon Chain, initiating Phase 0 of the three-phase process.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-07\/9c3af764-dfc4-40e5-8986-6d89b350b767.png\"><\/figure>\n<p>The Beacon Chain began the shift to PoS, enabling users to stake their Ether (ETH) and become validators. However, Phase 0 did not affect the main Ethereum blockchain: The Beacon Chain exists alongside Ethereum\u2019s mainnet. However, both the Beacon chain and mainnet will eventually be linked with the Merge.<\/p>\n<p>Phase 1 was meant to launch in mid-2021 but was delayed to early 2022, with developers citing unfinished work and code auditing as major reasons. From Phase 1 onward, Eth2 will house Ethereum\u2019s entire history of transactions and support smart contracts on the PoS network. Stakers and validators will officially step into action, as Eth2 will take mining out of the network. <\/p>\n<p>Phase 2, the final phase of the transition, will see the introduction of Ethereum WebAssembly, or eWASM, over the current Ethereum Virtual Machine (EVM). WebAssembly was created by the World Wide Web Consortium and is designed to make Ethereum significantly more efficient than it currently stands. Ethereum WebAssembly is a proposed deterministic subset of WebAssembly for the Ethereum smart contract execution layer. The eWASM was specifically designed to replace the EVM, which would see implementation in Phase 2.<\/p>\n<p>Marius Ciubotariu, co-founder of Hubble Protocol \u2014 a decentralized finance (DeFi) lending platform \u2014 told Cointelegraph that he is not really worried about the delays, as any new <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a> with such vast implications on the ecosystem would take time:<\/p>\n<blockquote><p>\u201cPoS is not live yet; however, I do not see this as a concern. I understand the Merge has taken longer than some would expect. But, with new technology and the opportunity for critical issues, a non-rushed <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>roach is the best one. As this Merge goes live, I\u2019m confident more protocols will show up. We\u2019ll continue innovation within the Ethereum community; something I have and continue to enjoy seeing\/experiencing.\u201d<\/p><\/blockquote>\n<h2><span class=\"ez-toc-section\" id=\"Merges_impact_on_the_Ethereum_ecosystem\"><\/span>Merge\u2019s impact on the Ethereum ecosystem<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The upcoming Merge will see the current PoW mainnet merge with the Beacon Chain, transferring the whole Ethereum history to the new chain. A complete change of consensus for an ecosystem as large as Ethereum will have a dramatic impact from both a technical and political perspective.<\/p>\n<p>Barney Chambers, co-founder and co-lead developer at cross-chain DeFi platform Umbria Network, told Cointelegraph that the Merge will be challenging:<\/p>\n<blockquote><p>\u201cThe accumulation of Ethereum will centralize in the hands of validators who already hold the majority of the tokens. The Ethereum Foundation claims that the merge will not impact the price of Ethereum, but the Merge will cause a fundamental shift in the way that new tokens are distributed and this will have a dramatic effect on the price of both Ethereum and the entire cryptocurrency ecosystem.\u201d<\/p><\/blockquote>\n<p>The proof-of-work mining difficulty level will skyrocket due to the difficulty bomb, making it unable to conduct mining at economically viable scales. The difficulty bomb is a code ingrained in the Ethereum protocol since 2015. It is set to execute every time a specific number of blocks have been mined and added to the blockchain. It makes the mining activity on the existing proof-of-work blockchain significantly harder.<\/p>\n<p><strong><em>Recent:\u00a0Metaverse visionary Neal Stephenson is building a blockchain to uplift creators<\/em><\/strong><\/p>\n<p>As a result, Ethereum\u2019s proof-of-work chain would be compelled to stop generating blocks, as the difficulty bombs would make mining a block nearly impossible. This situation is described by its developers as an \u201cIce Age.\u201d The bomb\u2019s simple goal is to encourage miners to merge completely, which will increase the adoption of the proof-of-stake chain. <\/p>\n<p>The transition to a new PoS network became necessary for Ethereum, given its expanding ecosystem leading to several network congestion and very high gas fees. Over the past year, however, the narrative has also shifted toward PoS being more environment-friendly than PoW. While some laud Eth2 as paving the way for a more environmentally friendly protocol, Patricia Trompeter, CEO of carbon-neutral crypto mining company Sphere3D, has other thoughts. Trompeter told Cointelegraph:<\/p>\n<blockquote><p>\u201cPoS only leads to unnecessary spending and misallocated energy resources, as \u2018Band-Aid solutions,\u2019 and marketing schemes like the \u2018Change The Code\u2019 campaign don\u2019t offer any solutions to a full industry shift toward renewable resources.\u201d\u00a0<\/p><\/blockquote>\n<p>Patricia believes PoS rather dismantles crypto\u2019s decentralized infrastructure, \u201cpushing power toward the wealthiest holders with unimpeachable control over users.\u201d<\/p>\n<p>Post-Merge, ETH issuance will drop to about 0.6 million per year, with a similar 2.7 million ETH burned, meaning a net 2.1 million ETH burned per year, or -7% in yearly<strong> <\/strong>ETH supply, making it a deflationary asset. ETH miners will be out of business officially once the difficulty bomb hits, being forced to mine other PoW coins with the same hashing algorithm for their existing equipment or fully exit the market.<\/p>\n<p>Ethereum co-founder Vitalik Buterin has predicted that the transition would not only help scale the network but also bring down the energy consumption by 95%. The transaction processing speed is expected to get on par with centralized payment processors. However, none of these features would arrive with the Merge on Sept. 19. <\/p>\n<p>The major scalability solution called sharding that allows for parallel transaction processing will only arrive after the completion of Phase 2, which is expected to take place in the second half of 2023.<\/p>\n<p>Daniel Dizon, co-founder and CEO of noncustodial and liquid ETH staking protocol the Swell Network, told Cointelegraph:<\/p>\n<blockquote><p>\u201cThe Merge represents a significant change to Ethereum\u2019s underlying economic model and hardware requirements, resulting in massive energy output reduction. It is expected there will be a significant demand for ETH as the rewards from participation in ETH staking will be increasing significantly from priority fees and MEV capture. The implication of the Merge is not fully priced in. Increased demand and reduced issuance for ETH will result in structural upward pressure on price compared to the existing state of Ethereum today.\u201d<\/p><\/blockquote>\n<h2><span class=\"ez-toc-section\" id=\"Does_the_Merge_make_Ethereum_a_security\"><\/span>Does the Merge make Ethereum a security?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Apart from the technical and financial impact of the Merge, the biggest discussion seems to be around whether Ether would qualify as security once the network makes the move to PoS. The discussion has gained a lot of steam online in recent days and the answer to the question would depend on who you ask.<\/p>\n<p>The debate around Ethereum\u2019s security status was prevalent long before the transition to PoS came into the picture. The debate gained a lot of momentum after the United States Securities and Exchange Commission filed a lawsuit against Ripple, deeming its sale of XRP\u00a0tokens as a security. <\/p>\n<p>Many XRP proponents have since pointed to the \u201cpre-mine\u201d of ETH and have often blamed the SEC for giving Ethereum a free pass. The confusion and dilemma around security status arise from a lack of clear regulations for the crypto market. While lawmakers agree that Bitcoin (BTC) can be regarded as an independent asset class, the status of Ethereum has been a topic of debate.<\/p>\n<p>Adam Levitin, a research professor at Georgetown University Law Center, outlined what could make the PoS-based Ethereum network a security in the eyes of regulators:<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">I&#8217;ve gotten some pushback here, so let me elaborate. &#8220;Security&#8221; includes an &#8220;investment contract.&#8221; &#8220;Investment contract&#8221; is defined by SCOTUS in Howey as a K for investment in a common enterprise where profits are expected &#8220;solely from the efforts&#8221; of a third party. 2\/<\/p>\n<p>\u2014 Adam Levitin (@AdamLevitin) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/AdamLevitin\/status\/1551064836162854914?ref_src=twsrc%5Etfw\">July 24, 2022<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>He added that \u201cHowey speaks of an investment of \u2018money,\u2019 but that has always been interpreted just to mean an investment of value. Putting up a stake readily satisfies this element.\u201d<\/p>\n<p><strong><em>Recent:\u00a0Decentralized storage providers power the Web3 economy, but adoption still underway<\/em><\/strong><\/p>\n<p>Coin Metrics co-founder Jacob Franek countered Levitin\u2019s argument, suggesting that Ethereum is one of the most decentralized platforms with open-source support.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">3\/ Is there an issue with disclosures today? <\/p>\n<p>Ethereum is an open-source, distributed project. <\/p>\n<p>It arguably has the most transparent and real-time disclosures of any distributed project and certainly more than a traditional, centralized company.<\/p>\n<p>\u2014 Jacob Franek (is Hiring) (@panekkkk) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/panekkkk\/status\/1551308110387728386?ref_src=twsrc%5Etfw\">July 24, 2022<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>Another major concern about the PoS transition has been the centralization in the decision-making process. Konstantin Boyko-Romanovsky, CEO of reward-monitoring and block transactions validation platform Allnodes, told Cointelegraph:<\/p>\n<blockquote><p>\u201cWhile the risk of centralization with Ethereum\u2019s new consensus mechanism PoS exists, it is ways away from being realized. So far, the strong community behind the Ethereum network has tackled every challenge, and there is no reason to assume that the issue of centralization won&#8217;t be resolved either.\u201d<\/p><\/blockquote>\n<p>The Ethereum blockchain has become the backbone of the DeFi, nonfungible tokens and decentralized autonomous organizations. While the ecosystem will continue to support such nascent use cases, the true transition to PoS with sharding and high scalability features will only be available after 2023. The success of Eth2 will highly depend on the execution of the final phase, but many market pundits are still skeptical about it, given the past delays.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"defi_newsletter\"><\/template><\/p>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/ethereum-merge-how-will-the-pos-transition-impact-the-eth-ecosystem\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; Ethereum Merge: How will the PoS transition impact the ETH ecosystem? &#8220; The Ethereum blockchain is on the verge of one of the most crucial technical updates since its inception, moving from proof-of-work (PoW) to proof-of-stake (PoS), also called Ethereum 2.0, or Eth2.\u00a0 Ethereum devs gave Sept. 19 as the perpetual date for the&#8230;<\/p>\n","protected":false},"author":1,"featured_media":479599,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDcvMTEyNDI3OWUtMDI3Zi00YWI1LWIxODQtZmZjYjQ5ZjczNjRmLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74868,82402,74891,74938,76556,74876,4965],"class_list":["post-479598","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-defi","tag-ether-price","tag-ethereum","tag-ethereum-price","tag-fintech","tag-proof-of-stake","tag-technology"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/479598","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=479598"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/479598\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/479599"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=479598"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=479598"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=479598"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}