It’s finally happening. After years of delays, and false-starts, the Ethereum Merge is set to go live on the 15th of September. This will at last complete the chain’s transition from proof-of-work to proof-of-stake. It will lay the bedrock for building a framework of much faster and cheaper transactions and it will slash the energy consumption of the chain to a fraction of a percent.
In terms of price, it is likely, as ever, to be a very volatile time. What’s not certain is what direction that volatility should go so there are a few things you should definitely know in advance of the Merge.
Preparing for Ethereum Merge – What To Do If You’re A Holder
The first thing you should know about The Merge is that the entire history of Ethereum, all the way back to the very first block, will remain unchanged after the transition to PoS. This means that any funds held in your wallet will still be accessible. You do not need to take any action to upgrade your wallet. In terms of UI, everything will work just as it has before.
What To Do If You’re A Miner
Unfortunately for anyone who has been mining Ethereum, the transition to PoS looks like the end of the road. From now on the network will be managed by validators, who only need to hold 32 to each other. There will no longer be any need for expensive mining equipment to maintain the security of the Ethereum network.
This means that miners will have to find something else to do with their rigs. The problem is that the proof-of-work required by the Ethereum network will not easily be replaced. With a market cap of $195 billion, Ethereum constitutes nearly 19% of the total cryptocurrency market cap.
However, with the exception of Bitcoin (which today has roughly twice the market cap of Ethereum) every other coin in the top 10 cryptocurrencies by market cap is already a proof-of-stake coin. In other words, the mining requirement for all cryptocurrency will effectively be reduced by 50% when Ethereum merges.
With Bitcoin already far below its all time high and with a surplus of mining equipment now looking for work, there is unlikely to be much profit in mining Bitcoin. Alternatively, miners could target much lower cap coins but again, the low market cap means that is unlikely to be worthwhile.
Finally, miners could continue to stay committed to Ethereum as a PoW chain. There is likely to be a fork where some activity remains on the old chain. However, with all of the developers moving to PoS, the vast majority of activity is certain to follow. The value of the old Ethereum chain is likely to fall significantly relative to the new one.
Unfortunately, there are very few good options for Ethereum miners. Expect to be able to pick up second-hand mining equipment for a low price.
Preparing for Ethereum Merge – What To Do If You’re A Trader
There are some traders who are looking to maximize their Ethereum before the Merge. The hope is that, because of miners maintaining the PoW chain, ETH may still retain some of its value on the old chain. So the plan is to swap any other asset to ETH in advance of The Merge.
When the Merge occurs, their ETH is essentially doubled. They have it on the old chain and the new chain. ETH on the old chain will likely plummet in value but as long as it’s worth more than nothing, it’s worth doing right?
Well, maybe. A couple of problems, the more people who do this, the more ETH there will be on the old chain and the more people trying to sell it. There really is no guarantee that ETH PoW doesn’t go to zero.
On top of that, it is likely to be a very volatile time for ETH. Nobody knows what will happen. If you’re swapping out stablecoins to buy ETH, and its value drops, there is no guarantee that the value of your ETH PoW will make up for the loss.
There is logic to this idea but don’t let anyone tell you it’s risk free. This isn’t financial advice but exercise caution as always.
So that’s it. A few things to do before the 15th of September in preparing for Ethereum Merge. Apart from that, just sit back and enjoy The Merge.