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Ethereum is about to undergo a major hard fork, known as ‘The merge’; it represents the culmination of Ethereum’s plan to transition from proof of work to proof of stake. Not without controversy within the crypto community, this change nevertheless will be, one way or another, the biggest event in crypto this year. In this article we will tell you what you need to know in order to prepare.
Ethereum (ETH) currently uses a Proof of Work consensus mechanism, ie. physical mining with graphics cards. Thousands of individual miners around the world use their computers to compete to mine the next “block”, the finder of the next block confirms all the Ethereum transactions included in that block.
After the fork, Ethereum will transition to Proof of Stake (POS) which is where ETH holders can stake their ETH to act as a validator to process new Ethereum blocks.
The beacon chain is the name given to the Ethereum blockchain that coordinates the network of stakers in preparation for the merge. There needs to be enough ETH value staked on the POS beacon chain in order to secure the network.
Currently the quantity of staked ETH on the beacon chain is about 13 million ETH, which represents around 11% of the total supply of ETH. The beacon chain was launched before the merge and is running in parallel to the Ethereum blockchain in order to give enough time for users to stake.
Some commentators have criticized the Proof of Stake economics as incentivizing centralization. Large exchanges will be some of the largest stakers and most powerful validators. Since those exchanges are obligated to follow FATF money laundry laws, there is deep suspicion that they will be compelled to censor transactions on the Ethereum blockchain that do not align with US law.
The stablecoins also have a large amount of power on the Ethereum blockchain. Because stablecoins are backed by other assets, after the fork, the stablecoins must choose which forks tokens their assets will back. This has led to a situation where a relatively small subset of market participants have a great deal of power over the Ethereum protocol.
In order to stake on the Ethereum Proof of Stake blockchain, you must use at least 32 ETH (Current value $51,500 USD) and have extremely high internet uptime. If you are interested in becoming a solo staker or validator you should visit the Ethereum staking launchpad.
Steak on a stake
The requirements for being a validator in Ethereum proof of stake are quite high. They are detailed below:
● You need to run an execution client as well as your consensus client.
● 1TB of hard drive capacity for mainnet execution chain data (growing at >1GB/day).
● Introduction of sharding will also increase storage, memory and bandwidth requirements.
● SSD storage to consistently handle needed read/write.
● Enough space on the drive to run maintenance on your node.
● Sufficient specifications to support your Ethereum client software
● Resource usage varies between different client software
● 24/7 uninterrupted connection
● Ensure no bandwidth throttling and no caps
● At least 1.2-1.3 GB download and 0.9-1 GB upload per hour
In reality, many Ethereum stakers are handing off their staking to third party staking services to do pooled staking such as LIDO DAO, Rocket Pool or Stakewise. These services will allow any Ethereum holder to stake their ETH even if they do not own 32 ETH.
Ethereum will undergo the fork to Proof of Stake consensus when the total block mining difficulty reaches the value of 58,750,000,000,000,000,000,000. The current value can be found here: bordel.wtf. At the time of writing, this is expected to occur on September the 15th. Although the precise moment depends on the hashrate of ETH POW.
To reduce the risk of loss of funds, exchanges, including FAMEEX, will halt ETH deposits and withdraws before the merge happens, and restart deposits and withdraws after the outcome of the hard fork is clear. Unlike in the case of BTC and BCH, there is unlikely to be an ETH proof of work forked coin with any value because Ethereum has too many stablecoins and other projects running on it that will support the new POS fork. If you would like to risk your coins, you would need to hold your ETH in your own wallet during the merge and be able to handle whatever happens at that time.
After the merge is complete. All Proof of Work mining will cease on Ethereum causing a loss to the mining industry of
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