With the Ethereum Merge anticipated to be completed soon, the transition from PoW to PoS can pose certain risks for those with assets at stake.
On the Ethereum network, $34.2 billion in total value is locked in smart contracts, while another $5.3 billion is being staked on the Beacon chain – Ethereum’s proof-of-stake (PoS) system.
As one of the leading blockchains in the industry, Ethereum is used by many crypto companies and startups that offer tokens, stablecoins, non-fungible tokens (NFTs), layer-2 scalability solutions, and various applications – including decentralized finance apps (DeFi apps), and cross-chain bridges.
To those who have Ethereum in their wallets, the prospect of moving a blockchain network with a $193 billion market cap and 400 decentralised applications (dApps) to a more sustainable model not only for the environment, but also for laying out future possibilities of network development upgrades – such as sharding.
The Ethereum merge is only 10 days away.
Here are the TOP 5 things you need to know if you hold NFTs ✅
Spoiler – You probably already know #1, but there's still a > 0 chance the opposite happens. So be careful.
— AdamMcBride.eth 🔎 NFT Archaeologist (@adamamcbride) September 5, 2022
The Ethereum Merge is scheduled to take place on 13 September. Christmas season is here again.
ETH holders will soon be airdropped ETH PoW tokens. What should you do to best position yourself?
Here are 7 steps you may consider to fully take advantage of the Merge:
— Bobby Ong (@bobbyong) September 5, 2022
As more opportunities for the blockchain can rise up after the Merge, oftentimes the risks and effort put into making it all happen can be overlooked. Ethereum developers have shifted the Merge date multiple times to ensure a safe network transition since the Beacon chain’s creation in 2020, making it the most anticipated – and significant upgrade for the blockchain to date.
To stay on top of things, monitoring network conditions is essential – especially for those who are hoping to trade the event. Traders should be well-armed and prepared to keep watch of any signs or indications in order to future proof when things go wrong.
With a ‘soft deadline’ of September 19th 2022, the Ethereum dev team has successfully tested three testnets – Ropsten, Sepolia, and its final testnet merge with Goerli in mid-August. However, minor issues in merging Goerli were detected: devs have run into problems regarding speed and clutter in organising the networks.
For those hoping to trade the Merge (or keep track of how it’s going), it’s best to stay vigilant on news, keeping an eye out on the following technical factors:
Blocks (and Epochs)
At the heart of any blockchain is its blocks. No matter the consensus system – PoW or PoS, all blockchains require blocks to be proposed and validated on the system in order for any transaction to be verified. Every blockchain has its own set of rules and conditions that must be followed by network participants for a valid transaction, and Ethereum’s Beacon Chain is no exception.
Units on the Ethereum Beacon Chain comprise of epochs and blocks. An epoch is a bundle of up to 32 blocks. Each epoch recorded on the chain should be displayed publicly within six and a half minutes.
Signs to keep a look out for include low voting participation on each epoch, if 2 subsequent epochs aren’t marked as final (13 minutes), and any stops in the creation of proposed blocks.
Infura’s Ethereum 2.0 API
Infura is a company owned by Ethereum venture capital group ConsenSys, which provides development infrastructure tools for developers looking to deploy applications without fully hosting their own Ethereum node.
According to Infura’s website, a number of leading dApps and platforms rely on Infura – including wallet provider Metamask, Uniswap, Compound, Maker, Brave, Gnosis, and Decentraland.
Keeping an eye out on Infura’s status page – which publishes incidents such as service outages and notices for scheduled maintenance as near real-time updates. As a large portion of the Ethereum ecosystem is reliant on Infura, keeping tabs on its status is also a great source to evaluate how dApps are performing on the network.
Most PoS networks have reward and penalty mechanisms. If a validator does well in attesting and proposing blocks to the blockchain, they are rewarded. However, inactivity, bad behaviour, and dishonest validations will result in a penalty called validator slashing.
Validator slashing is a network maintenance mechanism used by PoS network protocols to make network validators more responsible while being on the blockchain. It is designed to incentivize network participation, node security and availability, and discourage malicious activities on the network.
While each blockchain protocol’s reasons for validator slashing can differ from one another, slashing is a protective measure that is necessary for a network to remain safe. As Ethereum is home to over 410,000 active validators, it has its own rules in place. With measures from staking providers and validator software to detect whether misbehaviour is intentional or not so no validator is accidentally slashed.
However, if there happens to be a mass validator slashing, it should be viewed as a troubling sign. It should be emphasised that slashing is standard practice for blockchain maintenance, but if it happens en masse, it can potentially be an indication that software is not functioning as it should.
Keeping track of slashed ETH2 validators can be done with (again) BeaconScan and EthScan. Although checking up on validator slashing can be a great preventative measure, it’s worth looking beyond the node or server that you’re on.
Although there may be great guides out there from seasoned crypto enthusiasts telling you what you can potentially do with your assets in time for the merge, it’s best to double check multiple sources and be up-to-date with the correct information.
Monitoring external data can also give indication (or even warning signs) of network delays and errors that can be detrimental to your assets.
Being misled from using one data source happens more often than enough in the crypto sector – leading to many cases of fear and false rumour-mongering. Therefore, it’s important to combine multiple sources of information to gather a bigger picture of what is going on prior to making any decision on the blockchain.
Disclaimer: This article does not in any way represent or provide any financial advice.