A few weeks from now, one of the most consequential crypto events will take place. I am of course talking about the Ethereum merge the long-awaited transition to a new consensus mechanism, that could have massive implications for the Ethereum network but there are also serious tale risks that you need to know about. So in this article today I’m going to give you explain of Ethereum.
What is the Ethereum Merge?
The Ethereum network is about to transition to proof of stake the actual transition is called the Ethereum merge and it’s the first step in a number of upgrades designed to make Ethereum more scalable and hence more.
The Ethereum Merge will change Ethereum’s current consensus mechanism from “proof of work” to “proof of stake.” This milestone will facilitate Ethereum’s expansion into a more scalable, secure, and sustainable ecosystem.
And It is scheduled that the Ethereum merge, a long-awaited change in the technological underpinnings of the world’s second-most valuable cryptocurrency, will be complete between Sept. 10 and Sept. 20.
The TRUTH About Ethereum After The Merge
Ethereum is on fire. It has been up over 100% over the last two months, and this is all in anticipation of the merge. When Ethereum transitions from proof of work to proof of stake and you may have seen in the news that Ethereum successfully launched on the Goerli Testnet, Well what does this even mean and what does this mean even more importantly for the future price of Ethereum over the next few weeks, well let me break it down.
They are changing their entire ecosystem. And if done wrong, there is a lot to lose. Ethereum is moving from proof of work to proof of stake, as we said. Instead of using electricity and computers to mine, they will use locked of Ethereum much more energy efficient.
However, they can’t just transition right away. It doesn’t happen overnight, actually. This is multiple years in the making because there’s a lot at risk here. They are changing their entire ecosystem. And if done wrong, there is a lot to lose.
When blockchains make an update or a Hardfork, they first go through a Testnet to make sure that everything is working before actually going to the real deal. Usually, there’s one test net. If everything looks fine, then they merge onto the mainnet.
However, with Ethereum, they are going through the riskiest Hardfork to date. Ethereum has so much value sitting on it it is number two in the market cap. If things go wrong, it will be catastrophic. So instead, Ethereum is actually going through three test nets before they actually Hardfork on the mainnet.
So in June, we had the Ropsten test net. In July, we had the Sepolia testnet, and here we are now in august, and Ethereum successfully launched on the Goerli testnet.
And this is very, very exciting like we said, years in the making there is a lot of hype and because of this the price of Ethereum is exploding. And if everything goes smoothly, we have an estimated date for the real thing on the Mainnet scheduled for September 19th.
But of course, if things go wrong or delayed, then maybe we’ll see a launch on the Mainnet much later. Remember, the whole point of these Testnets is to look for a problem. But right now, as I write this article, there is a lot of excitement, and there is a lot of hype.
And if we look at the chart, we can see a lot of this excitement really started around June time at the Ropsten Testnet. And then from there, the Sepolia Testnet, and here we are at the Goerli Testnet Ethereum has been on fire. So there’s a lot of excitement right now for Ethereum to the point where everyone’s saying Ethereum is going to flip bitcoin. I don’t think that’s going to happen, or at least anytime soon.
But I’m curious to know what you guys think. Do you think that Ethereum can actually flip bitcoin, and can it happen within the next year? Adding to this excitement is a potential hard fork airdrop. What do I mean by this?
There are Ethereum miners that don’t want to move to proof of stake. Some of them are going to continue mining on proof of work, and if this happens, Ethereum users will double their assets, meaning let’s say they have 20 Ethereum, they’ll now have 40 Ethereum 20 on the proof of work chain and 20 on the proof of stake chain.
So basically an air job, but here is where things get confusing. We have an issue we know in the crypto space the typical buy the rumour sell the news leading up to an event, the price usually increases.
And then when that event actually happens, whether it’s good or bad, we typically see a drop-off. But in this case of Ethereum users, if they want this airdrop, they’re actually going to have to hold through the Ethereum merge.
And they may get this potential Hardfork of these new assets right free money. But this is the problem if they don’t hold past the merge right. They sell right before the event, which is what many Traders do.
Then they won’t be eligible for this potential hard fork airdrop. But if they hold through, they’ll get that potential hard fork airdrop, but those assets may be worth nothing. And at the same time, they’re still holding on to their Ethereum past the events.
So they may have run the risk of not selling it at the top right before the event. And my take on the merge, maybe not being a popular take, is that it’s going to be extremely boring.
Most people are going to have no idea that it even happened as humans, we like to see results for our actions right away, and that is not what we’re going to see with the Ethereum merge right after the actual merge. Ethereum is still going to be slow and expensive.
So I do think that it has a good narrative and good hype, but it’s about what we see in the future. This is a very big step into building on top of Ethereum for the future, for example, shard chains, which is what will make Ethereum layer one actually faster. So this is also something I think that’s going to play into this narrative is that even if this merge happens, perfect success, no issues right after it happens.
Most people users are not going to really see any difference in the chain. And this potential Hardfork airdrop is getting a lot of attention. But looking into it further, I realized there is a huge problem. When it comes to This airdrop, people are likely going to sell their assets as fast as they can. It is all sellers. There are no buyers.
Everyone knows that this chain for proof of work will have no real value even if we look at the stablecoins on there, which will be super important to the defy ecosystem on any chain USDC and Tyler have already come out stating that they are supporting the proof of stake chain not the proof of work chain.
So pretty much everyone knows the Proof-of-work chain is going to have zero value, and because of this, people are going to try and sell their assets as fast as they can. We can see this happen within just the first couple of blocks. But here is where things get very risky in order to take advantage of these new assets on proof of work or not really new assets.
But the original chain users have to move very fast, but if they move too fast and they don’t know what they’re doing, they can lose all of their assets. The people that are really going to benefit from this proof work chain are the miner’s exchanges and advanced traders because there’s a lot at risk here. Here’s the thing to actually take advantage of this hard fork. As we said, you have to move fast.
But if you move too fast and you don’t know what you’re doing, you run the risk of being the victim of a replay attack this is when a transaction on one chain gets replayed on another chain. For example, you get this proof-of-work asset that you think is an airdrop, you go ahead sell it for a very cheap price because it’s not as valuable as a proof-of-stake chain.
But then your transaction gets replayed on the actual true proof of stake chain, and you lose all of your assets. This is actually something that happened to bitcoin and bitcoin cash immediately after their hard fork. Later on, it was fixed. So with the potential case of Ethereum proof of work and proof of stake, if they share the same chain id right away and the user doesn’t know what they’re doing, they may think they’re selling an asset just on proof of work or making a transaction just on proof of work.
But it actually gets replayed on the proof of stake chain, and this is why I’m saying that it’s very risky because you need to move fast, but if you don’t know what you’re doing and you move too fast, you’re actually running the risk of losing your assets.
So there’s probably going to be a lot of mayhem after this happens because remember, it’s all about moving fast, it’s all about speed, and because of this, we probably will see insane gas fees, we will see minor bribes just complete.
Hey, so for the average retail investor, this could be very risky I know there’s a lot of hype now talking about this potential hard fork airdrop assets.
But for most people, it’s just going to be very risky if they move too fast. But at the same time, if they don’t move too fast and they wait, the opportunity may be gone as you can see by now, this is why it can get so confusing.
But for the people that do want to take the risk again, I am not recommending anything. This is just if you are a person that wants to take this risk. In order to move fast, you’ll probably need to have your assets on a self-custody hot wallet by keeping it on in exchange. There’s no guarantee that the exchange will support the airdrop, and also, number two, even if they do, there’s no guarantee they will give it to you in time for you actually to make money with it. It’s all about speed.
And number two, opening up accounts with exchanges that have already stated they are going to support Ethereum proof of work, for example, platforms such as MEXC Global BITMEX and Poloniex.
So there are two main trading opportunities at the moment. The simpler method is riding up the hype of the Ethereum launch to the merge.
And then it’s up to you whether you want to sell it or the actual event or wait after the event, and then the more advanced method, the more risky method, is actually holding through the merge and getting these potential hard fork assets. And then moving very fast because, like we said earlier, if you get the hard forked assets and you move too slow, you’ll probably miss the opportunity unless Ethereum two assets pick up later on as mean coins.
But in the immediate future, right after the Ethereum merge, everyone knows the value on proof work Ethereum is basically zero. And they’re going to try to move those assets and sell them as fast as they can. There will be congestion, there will be high fees, there will be a lot of mayhem, or you can keep it simple continue with dollar cost averaging Ethereum and thinking about the long term.