Ethereum can both record transfers of its cryptocurrency and all of the assets and functions that are maintained in “smart contracts” on it. All decisions about upgrades are made by consensus among developers and interested parties who have built applications (such as stablecoins and DeFi) or listed assets on Ethereum. Some miners who have made significant investments in hardware to run PoW might oppose the Merge and attempt to run the old software. Applications running on Ethereum may be negatively impacted, and some are expected to temporarily suspend transactions to install new components and adapt to the new protocol during the Merge. The expectation is still that the overall conversion will be smooth due to the significant amount of testing that has been performed.
As PoS reduces the need for electricity and specialized mining hardware, the rewards for validating transactions can be reduced significantly. This partially explains why the price of ether has increased recently as other currencies, including bitcoin, have not. Another benefit of the Merge is network security. Currently, to take control of Ethereum or Bitcoin, a hacker needs 51% of the total computing power used for mining. A hack of a PoS blockchain requires a stake of half of all the cryptocurrency, which would be even more expensive.
Historically, Ethereum has been slow and expensive, especially when the network is busy. Charges to have transactions recorded (“gas fees”) can be as high as $100 per transaction. Improvements after the Merge, including the “surge,” the “verge,” the “purge” and the “splurge,” will mainly focus on improved scale and efficiency. “Sharding,” the process of splitting a database into pieces to spread the load, will permit the blockchain to surge and handle many more transactions at a potentially lower cost. The verge will introduce a new mathematical protocol allowing a user to run the software without needing to store all of the data on the blockchain. The purge will eliminate old data in Ethereum’s transaction history. Finally, the splurge will implement a number of miscellaneous upgrades.
Although the Ethereum Foundation has postponed the Merge in the past, successful dress rehearsals like the Goerli testnet make a mid-September date look promising. Some predict that the Merge will continue to propel Ether’s value. Others are more cautious. Without question, a successful Merge will be of great significance to the crypto industry.
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