Ethereum Merge: Is Your Ether (ETH) Safe?
The mainnet upgrade is upon us, and the environment is better off
Table of Contents
- What exactly is happening to Ethereum?
- Is your Ether (ETH) Safe?
- Crypto Trading Bots
- Will NFTs be affected by the merge?
- Is Ethereum going to fork?
- Could validator centralization be an issue?
- Will Ethereum be ok after the merge?
Web3 technology remains in its early stages, with innovations spinning off across the globe 24 hours a day, 7 days per week. Once in a while, BIG events take place that often deserve the attention of the community at large.
The Ethereum Merge is a hot topic this month as all testnet upgrades have now been completed, with merging officially scheduled for the world’s first smart contract-based, DeFi ridden, Layer 1 blockchain… But when?
Though the Ethereum Foundation does not state an exact day and time, they did make mention that the network will obtain the upgraded PoS consensus mechanism this month. The expected date range for the merge to complete is “between September 10th and September 20th.”
At the time of this article composition, the first part of the merge, Bellatrix, has hit the ground running. Paris is evidently scheduled to come after this phase.
Ethereum Co-Founder, Vitalik Buterin, speaks up regarding Bellatrix in a tweet from September 5th.
What exactly is happening to Ethereum?
Ethereum, the world’s first smart contract blockchain network, is getting a facelift this month. Mainly, this is of concern to developers and node operators on the network. Everyday users or holders of the cryptocurrency, Ether, will not be directly participating in this event.
The network has been kept secure and validates transactions utilizing the consensus model, proof-of-work, which is what the Bitcoin network is built upon. For the past number of months and years, there has been talk of upgrading Ethereum to a PoS, or proof-of-stake, network.
Upgrading Ethereum to proof-of-stake from proof-of-work is going to help the network with energy efficiency since proof-of-work mining is quite power intensive.
"The Merge represents the joining of the existing execution layer of Ethereum (the Mainnet we use today) with its new proof-of-stake consensus layer, the Beacon Chain... A truly exciting step in realizing the Ethereum vision – more scalability, security, and sustainability." - Source
Is your Ether (ETH) safe?
Upgrading a blockchain network is a lot like a PC going from Windows 10 to Windows 11. The operating system gets a facelift to backend functionality and front-end aesthetics, leaving the data and files fully intact.
So, to answer the question… Yes, your Ether is going to remain safe on the blockchain. In fact, exchanges are planning on putting a pause on all Ethereum transactions for the ~12 minutes that the merge will take to complete so as not to add unnecessary risk to users.
Will scammers still work to confuse and negatively influence uneducated users? Sure, that is what they do best. Which is why it is always a good idea to err on the side of caution while using online apps such as email and hot wallets or visiting potentially sketchy websites.
**Never allow your private keys or seed phrase to be exposed to anything or anyone.
Crypto Trading Bots
How will crypto trading bots be affected by the Ethereum merge? Since many operate within the jurisdiction of a centralized exchange such as Binance, Coinbase, or KuCoin, the end user has nothing to worry about as these exchanges are aware of the merge coming.
Stoic AI, for example, operates on Binance. Therefore, when Binance pauses Ethereum trading, Stoic AI will not be executing ETH-related trades at that time and will wait until the upgrade is over. Keep in mind, the upgrade is only going to last a handful of minutes and should not affect an entire day’s worth of trading.
Crypto trading bots will trade as planned both before the merge and after the merge to help you achieve various outcomes within your crypto portfolio.
Will NFTs be affected by the merge?
The answer to this question is 2-sided.
On the one hand, NFTs serve as unique tokens of value on the blockchain. Just as Ether will remain safe, so will NFTs after the mainnet upgrades. In fact, investors and end users do not have to prepare in any way to “safeguard” their assets before the merge.
Rest assured, your precious Moonbirds , Cryptopunks, or Bored Apes will still maintain their levels of prestige.
On the other hand, the flip side to that answer is discovered in whether or not the network is going to fork after the merge. If this happens, duplicate NFTs, or copies, could arise onto the scene, with only one of them being the true token.
Is Ethereum going to fork?
Not all Ethereum participants are on the same page with the merge, as some do not want the chain to move to proof-of-stake and are therefore planning to hard fork the network in order to maintain the integrity of the proof-of-work consensus mechanism.
Ethereum could possibly fork, essentially causing the Ethereum mainnet to split off into 2 completely different chains, just like Bitcoin and Bitcoin Cash, or Ethereum and Ethereum Classic.
If the network does indeed fork, and a chain like ETHPOW gets created, then it may cause some confusion in the marketplace with duplicate NFTs.
The confusion, though, would be short-lived as various apps and NFT marketplaces would place the true, proof-of-stake Ethereum blockchain at the top of the food chain, weeding out the bad actors over time.
Could validator centralization be an issue?
With the move to proof-of-stake, miners are replaced by validators, as mining will no longer be a relevant term within the upgraded network.
Essentially, the more stake, or holdings, of ETH an individual or entity owns, the greater the power they have over the future direction and decisions of the network. Not to mention, they can earn even more ETH by validating transactions with a huge stake.
Exchanges and other companies know this, which is one of the reasons why they make such a strong push for investors to stake ETH on their platforms. Large conglomerates such as Kraken, Coinbase, Lido, and Binance are providing more than 65% of all staked ETH at the moment.
The large staking pools may not lend well to the whole “decentralization of crypto” factor, yet will likely keep the network quite stable. Not to mention, the network will become more decentralized over time as more validators hop onto the scene.
Will Ethereum be ok after the merge?
As with any network update, there is bound to be bugs. Rest assured, the Ethereum developer community is full of intelligent and noteworthy individuals that will squash potential bugs as quickly as possible to ensure a smooth transition to proof-of-stake.
The majority of NFTs, DeFi-related apps and Layer-2 scaling protocols rely on Ethereum to keep their doors open. Ethereum isn’t going anywhere. In fact, this upgrade to proof-of-stake is only the beginning of the transformation.
Tokens on Ethereum will remain the same, as there will be no new ones created such as ETH 2.0 tokens. Beware of scammers that try to to dupe you into buying or trading for assets such as these.
"The Merge is the most significant upgrade in the history of Ethereum. Extensive testing and bug bounties were undertaken to ensure a safe transition to proof-of-stake." - Ethereum.org
The merge is coming. The time is upon us and there is no stopping It from happening at this point. Developers have been working on this upgrade for years and it is finally coming to fruition. The environment will be better off as the energy consumption, as a result of the merge, is going to plummet to fractional amounts.
Could something go wrong during or after the merge? Of course. Will developers do their best to ensure as smooth a transition as possible? Yes.
All that is left to do now is sit back and watch the magic happen. Upgrades are a natural evolution of blockchains and in the end, will prove to be a pivotal moment in the history of Ethereum. Time to get excited!
Thank you for tuning in.
And as always, remember… Keep your fingers on the Pulse!
Author: Ken Melendez
Who is Cindicator?
Cindicator is a world-wide team of individuals with expertise in math, data science, quant trading, and finances, working together with one collective mind. Founded in 2015, Cindicator builds predictive analytics by merging collective intelligence and machine learning models. Stoic AI is the company’s flagship product that offers automated trading strategies for cryptocurrency investors. Join us on Telegram or Twitter to stay in touch.
Information in the article does not, nor does it purport to, constitute any form of professional investment advice, recommendation, or independent analysis.