Ethereum Merge: What is it and when will it happen?

"Following years of hard work, Ethereum's proof-of-stake upgrade is finally here," the Ethereum Foundation announced in August

Ethereum, the world’s second-largest cryptocurrency, is preparing for a complete overhaul of its underlying technology next month in the most radical move yet by the crypto industry to address environmental concerns.

Announced by the Ethereum Foundation in August, the first part of the upgrade will begin on 6 September, 202, with the second and final stage expected to be completed at some point between 10-20 September, most likely 15 September.

Here’s everything you need to know about what’s set to take place.

What is the Ethereum Merge and when will it happen?

The switch to proof-of-stake (PoS) will see Ethereum’s entire underlying network ditch the energy guzzling proof-of-work (PoW) system, which currently involves using powerful computers to solve complex puzzles in order to maintain the security of the network, mine new units of the cryptocurrency and verify transactions.

The new system instead does all this by using existing stakeholders as the consensus mechanism, with some estimates suggesting that the switch to PoS will reduce Ethereum’s electricity consumption by a factor of 1,000.

Currently, the network uses an incredible amount of energy to power the PoW system, which is roughly equivalent to the annual electricity consumption of Portugal.

The switch to PoS has been planned for years, and was initially set to take place in 2021. However, the complexity of the upgrade and the need to ensure that everything runs smoothly has seen the date pushed back several times.

Now, finally, it appears to be just around the corner with the Ethereum developers setting a date for the first part of the upgrade, which will begin on 6 September, 202.

From there, the network will take around two days to reach a difficulty level known as the Terminal Total Difficulty (TTD), which will then trigger the Bellatrix upgrade on 10 September.

The final stage of the Merge is then expected to take place between 10-20 September, depending on the hashrate of the network, with 15 September being the most likely date.

Once the hashrate reaches a certain level, a new block will be created on the PoS chain, and the PoW chain will be abandoned by the majority of the network.

This will leave behind a small group of miners who will continue to operate on the PoW chain, essentially creating a new cryptocurrency.

What is the Ethereum Merge controversy?

When the Merge occurs, the network will essentially split in two, creating a PoS chain and a PoW chain. It is not the first time a leading cryptocurrency has experienced a major fork – bitcoin, which still uses PoW, has been forked numerous times to create spin-offs like Bitcoin Cash and Bitcoin Gold – and each time there is the risk that users do not adopt the new version.

The decentralised nature of cryptocurrencies mean there is no authority to enforce which chain is used, though there will need to be consensus among Ethereum-based projects and NFT marketplaces like OpenSea, which will suddenly have duplicates of non-fungible tokens hosted on each of the Ethereum blockchains. Deciding which is the “real” NFT may ultimately be up to the market.

Some crypto advocates, who value decentralisation over environmental credentials, also argue that PoS moves away from the core tenets of cryptocurrency by creating greater centralisation and control by large stakeholders.

The other big resistance comes from those currently mining Ethereum, who have invested huge amounts of money into the equipment needed to mine it. All of their computers used to generate their income will be completely unnecessary with a PoS system.

Will the Ethereum price continue to rise after the Merge?

This is currently the $200 billion question. Ethereum’s market cap has doubled since hitting a yearly low in June of just above $100 billion.

It still remains way off its peak of more than $550 billion, which it hit during last year’s crypto bull run, but it has managed to significantly outperform the rest of the market in the build up to the Merge.

“While attempting to second guess what will actually happen next is of course the preserve of the trader, the Merge continues to captivate a growing audience, and has coincided with a rally in bitcoin and traditional stocks,” market analysts at the crypto exchange Bitfinex wrote in a recent note.

“We are living through a once-in-a-lifetime moment and are watching technical evolution happen before our eyes. We look forward to welcoming a new Ethereum, an Ethereum that consumes less energy and brings long-term scalability, and security to the community.”

If the transition is smooth and consensus is reached early, then confidence will be high for the latest price rally to continue.

Could Ethereum ‘flip’ bitcoin after the Merge?

The excitement surrounding the Merge has once again led to speculation that Ethereum could finally fulfill the hypothetical “flippening”, whereby

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