Five Misconceptions about the Ethereum Merge (ETH 2.0)

PUBLISHED Sep 17, 2022, 11:17:53 PM        SHARE

imgTobi Opeyemi Amure

The long-awaited Ethereum Merge has arrived!

Investors, business analysts, industry stakeholders, and skeptics all waited with bated breath for Ethereum's transition from a PoW consensus mechanism to a more energy-efficient PoS model, which ShapeShift founder Erik Voorhees described in a tweet as the most consequential event in cryptocurrency history since the release of the Bitcoin whitepaper. More than 41,000 people watched the "Ethereum Mainnet Merge Party" live event on YouTube and saw when the merge was finally completed in the early hours of September 15, at around 1:40 a.m. EST.

“And we finalized! Happy merge all. This is a big moment for the Ethereum ecosystem. Everyone who helped make the merge happen should feel very proud today,” Ethereum co-founder Vitalik Buterin wrote on his Twitter page following the Merge.

image description

The Merge Ushers in a Greener Ethereum The main takeaway from the Merge is that the blockchain has transitioned from the PoW model, which involved the use of miners to validate transactions and secure the network, to the PoS consensus, which uses stakers in transaction validation and network security. Because the mining process that was used when the network operated on a PoW model will no longer be used, energy consumption will be reduced by an unprecedented amount. The need for energy-intensive computers will be effectively removed.

Following the merge, the Crypto Carbon Ratings Institute (CCRI) reported that Ethereum's energy consumption was reduced by a whopping 99.99%, as was the network's carbon footprint. To back up CCRI's reports, Alex de Vries' Digiconomist, a company known for its Electricity Consumption indices, estimates that the energy saved under this new blockchain consensus would be 99.98%, transforming the network into what many refer to as a "Green Ethereum."

Five Misconceptions about the Ethereum Merge

While this development has erupted the crypto space and become the clout of the day, and for many weeks to come, a lot of people are left with more doubts and questions than excitement and solutions. Here's a list of some common misconceptions following the merge that you should be aware of so you don't get caught off guard;

Gas fees will be immediately reduced following the Merge

When considering an Ethereum update, the first thing that comes to mind is a reduction in the strangling gas fees. Unfortunately, this is arguably the most common misconception among investors about the merge.

On the bright side, Ethereum developers are working to improve network throughput by implementing the "roll-up centric ethereum roadmap" in order to make gas fees more affordable.

The Merge will immediately affect the price of ETH

Another area of speculation has been the effect of the merge on Ethereum price. Some predicted that the price would dip due to possible technical issues or negative market sentiment, which would have resulted in massive ethereum withdrawals before or during the merge completion. Others anticipated that the price would immediately spike and earn them a quick profit.

Neither has been the case, as the price has not witnessed any significant change. There was a slight decline in the hours following the merge, but there has since been a price correction and the asset increased by about 2-3% in the last 24 hours, according to CoinMarketCap.

Blockchain transactions will be way faster.

The Ethereum blockchain is quite active, with DApps and other use cases keeping the network busy and large transactions being processed by the second.

Following the merge, transactions are about 10% faster, implying that it now takes 12 seconds for a new block to be added to the chain. This is only a slight improvement over the mainnet's block time of 13.3 seconds, and users may not even be able to tell the difference.

Anyone can be a validator under the new PoS model.

Staking is the foundation of the PoS consensus model, so those who want to be transaction validators in this new iteration of Ethereum must have at least 32 ETH locked away.

Besides, while the minimum amount of ethereum required to become a validator is 32 ETH, this does not guarantee that a validator will be chosen for transactions, as more staked ETH increases a validator's chances of being chosen by the system to validate transactions for a reward. Moreover, while supercomputers are no longer required, there are still some basic hardware requirements.

Staked ETH can be withdrawn after the Merge

Before the merge was completed, investors who intended to become validators began to stake their ethereum, and validators now have staked ETH (stETH), a cryptocurrency backed 1:1 by Ether (ETH) that is locked on the Beacon chain and has no withdrawal option.

The staked ETH withdrawal option is expected to be available in another scheduled Ethereum network update following the merge, known as the Shanghai update, which could take 6-12 months or more.

Read Also: NFT Consulting Firms: Here is Everything You Should Know

Bottom Line

It's safe to say that the merge was a success, and the Ethereum developers, engineers, and team should be commended for pulling off such a feat with almost no recorded hitches. The true success of the update will be tested in the coming months, and there is much to look forward to with more updates on the way that promises to improve scalability, speed, and security.

Storing your cryptocurrencies in online wallets, exchanges and software wallets exposes you to risks of being hacked. Consider storing them in a hardware wallet today

Sound investments
don't happen alone

Find your crew, build teams, compete in VS MODE, and identify investment trends in our evergrowing investment ecosystem. You aren't on an island anymore, and our community is here to help you make informed decisions in a complex world.

More Reads
Will Nike Stock Recover?

Nike is an American multinational corporation that design, develops, manufactures and markets footwear, apparel, equipment and services worldwide.

A Hard Time

Stock Market Commentary

5 Income Stocks for Retirees

When most people reach the age of 50, they start thinking about retirement. At this age, you need a strategy in place about housing, working, and income before retiring.

Mondelez International: Buy The Snack Giant

Slow and steady wins the race. It holds true for investing in equities because of reversion to the mean. For instance, the latest group of new tech stocks were trading at bubble valuations and plummeted when the Federal Reserve started tightening.

Desperately Seeking Yield: 16 September 2022

The dark side of rising interest rates is conspicuous near and far, but there’s also a bright side: higher yields, which are a byproduct of risk assets that take a beating in price, which in turn lifts trailing payout rates.

Doing Your Due Diligence When Buying a Stock

Doing your due diligence when buying a stock can make the difference between making money or losing it. Obviously, no one wants to lose money on an investment, so doing proper research is critical. This is by no means a comprehensive list, and many factors are beyond the scope of this short article, but here are a few basic things to look for when stock picking.

Market Musing 9-13-2022, CPI Data causes Market Puke Out

The CPI Data confirms inflations persistence. The Market reacted badly and wiped the last 4 days of gains, driven by ECB QE and Rate Hike for European banks. Going forward, Bad Economic news is just bad news for the markets

Monthly Dividend Stock In Focus: Pembina Pipeline

Midstream energy companies are widely-known to be a source of high dividend yields. Midstream operators benefit from favorable economics because of the continued need for oil. In addition, midstream companies are less exposed to commodity price risk than their upstream peers in the exploration and production industry.

NFT Consulting Agencies: Here is Everything you need to know

NFT Consulting Agencies are important to the crypto space. Find out why

Will it break through

At&t feels good to me this week

10 Solid Picks For A Rocky Market - Zen Investor

I searched for companies that are inexpensive relative to their fair value (margin of safety) and have above-average price and earnings growth prospects.

Another failed rally

A quick glance at the chart below tells the story. The rally-sellers dominated the action in January, February, April, June, and August. The dip-buyers tried to take back control in March, May, and July. They nearly succeeded in the two months from June 16 to August 16 by taking the market up 17.4%. It has all been downhill since then.

September 2022 Stock Considerations

With the start of a new trading month, it is time, once again, for me to highlight some of my potential stock buys for September. With all the recent market volatility there is no shortage of stocks that are looking seemingly cheaper when compared to the closing months of 2021.

A Dichotomy

Market Commentary

US CPI in Focus

The US dollar rally is of historic proportions. Its climb is relentless, though there was around a 4-7% pullback for a few weeks beginning in mid-July. Since then, the greenback has made up for lost time and appreciated to multiyear highs against most of the major currencies.

Monthly Dividend Stock In Focus: Prospect Capital

Business Development Companies — or BDCs, for short — allow investors to generate income with the potential for robust total returns while minimizing the amount of tax that is paid at the corporate level.

The 5 Best Cheap Stocks To Buy Now

Everyone loves to buy something on sale. For investors, that means finding undervalued stocks. Although available during bull markets, investors usually find more cheap stocks during bear markets. Prices drop, sometimes falling too far, making some stocks a deal, like in 2022. Hence, now is a good time for investors to scour lists and find the best cheap stocks to buy.

CLIMB USA Community Association

Join CLIMB USA for their CLIMB Community Association

Aussie Sells Off After RBA Hikes 50 bp while Sterling Bounces on UK New Initiative

Overview: A GBP130 bln initiative by the new UK government to protect households from the surge in power costs helped lift sterling from 2.5-year lows.

A Simple Plan To Pay Off Debt [Updated]

We all know how that day ended up. You were scared out of your mind before and during the ride, but after it was all over, you realized it wasn’t that bad.

Resources for Publishers
Resources for New Investors