What is the ETH merge? A milestone event for Ethereum.

Ethereum, the second-largest cryptocurrency by market capitalization, has undergone one of the most significant upgrades in blockchain history – the Ethereum Merge. The shift from proof-of-work (PoW) to proof-of-stake (PoS) marks a significant milestone that improves Ethereum’s scalability, security, and energy efficiency. Through the merge, Ethereum abandoned its energy-intensive mining system and introduced a staking mechanism that allows users to validate transactions while earning staking rewards. This event not only affects Ethereum holders, DeFi projects, and NFT platforms, but also impacts the broader cryptocurrency market. In this article, we will dive deep into what the Ethereum merge is, how it works, and its impact on the future of Ethereum.

What is the Ethereum Merge?

The Ethereum Merge is a long-awaited upgrade that transitions Ethereum from a Proof of Work (PoW) consensus mechanism to a Proof of Stake (PoS). Before the Merge, Ethereum relied on miners to validate transactions, similar to Bitcoin. However, with PoS, Ethereum now uses validators who stake ETH to secure the network.

Why is it called “merger”?

The merge refers to the integration of the Ethereum mainnet with the Beacon Chain, which is an independent PoS blockchain launched in 2020. Ethereum does not operate two separate networks, but instead “merges” them into a single PoS-based system, eliminating the need for mining. This transition has significantly reduced Ethereum’s energy consumption by over 99%, making it a more sustainable blockchain for the future.

How does the Ethereum merge work?

Before merging, Ethereum ran on two parallel chains:

• Ethereum Mainnet (PoW): Handles transactions and smart contracts, but relies on miners.
• Beacon Chain ( PoS ): Launched as an experimental PoS network, it does not execute transactions. Merge Period:

1. The Ethereum mainnet merges with the Beacon Chain.
2. Proof of Work has been completely removed, and Ethereum has fully adopted Proof of Stake.
3. Validators replace miners, and ETH staking becomes a new way to secure the network. Now, anyone who stakes 32 ETH can become a validator and earn staking rewards instead of mining rewards.

Why is the Ethereum Merge so important?

The Ethereum Merge is not just a technical upgrade - it reshapes the Ethereum ecosystem and the broader crypto market.

The main advantages of Ethereum Merge

• Significantly reduce energy consumption: Ethereum’s energy consumption has decreased by 99.95%, making it one of the most environmentally friendly blockchains.
• No more mining: Transitioning to PoS eliminates the need for expensive mining equipment, thereby reducing the ETH inflation rate.
• Enhanced security: Compared to PoW, PoS-based Ethereum is less susceptible to 51% attacks.
• The foundation for future upgrades: The merge is just the first step towards Ethereum 2.0, paving the way for sharding and reducing transaction fees. The transition of Ethereum to PoS has changed the rules of the game, making it more scalable and environmentally friendly.

The impact of Ethereum Merge on the cryptocurrency market

The merger has had a significant impact on Ethereum, altcoins, and the entire cryptocurrency industry. 1/ ETH staking is becoming more popular

• Ethereum now rewards users who stake ETH to validate transactions, rather than mining.
• Staking platforms such as Lido and Rocket Pool, as well as exchanges like Gate.io, allow users to stake ETH and earn passive income. 2/ Changes in Ethereum supply and deflationary effects
• The merge reduced the new ETH issuance by 90%, lowering Ethereum’s inflation rate.
• Through the EIP-1559 burning mechanism, the supply of ETH may become deflationary, thereby increasing its long-term value. 3/ Growth of DeFi and NFT Markets
• The merge improved network efficiency, benefiting DeFi protocols and NFT platforms built on Ethereum.
• Lower energy costs and higher security have attracted more developers to use Ethereum. 4/ The impact on the GPU mining industry
• Ethereum miners are forced to turn to other PoW chains, such as Ethereum Classic (ETC) and Ravencoin (RVN).
• Many miners sold their GPU hardware, leading to a decline in global GPU prices. The merger has reshaped the entire Ethereum ecosystem, making ETH a more attractive long-term investment.

What will happen after the Ethereum merge?

Merging is just the first phase of Ethereum’s long-term roadmap. What happens next:

• Shanghai Upgrade (2023-2024): Allows users to withdraw staked ETH, making staking more flexible.
• Sharding (after 2024): Ethereum will implement sharding, dividing the network into smaller chains to increase transaction speed and reduce gas fees.
• Layer 2 expansion: Rollups such as Optimism, Arbitrum, and zkSync will continue to scale Ethereum, reducing costs for DeFi and NFT users. Ethereum’s roadmap focuses on scalability, security, and sustainability to ensure it remains the leading smart contract platform. How to buy and stake ETH after merging? For investors looking to buy, trade, or stake ETH, choosing a secure and highly liquid exchange is crucial.

Where to buy and trade ETH?

• Gate.io provides a secure platform for buying, selling, and trading highly liquid ETH.
• Users can access spot trading, futures, and staking options to maximize their ETH holdings.

How to Stake ETH?

• Solo Staking: Stake 32 ETH and become a validator.
• Staking Pools: Platforms like Lido, Rocket Pool, and Gate.io’s staking service allow users to stake ETH with a smaller amount.
• Exchange Staking: Users can directly stake ETH on Gate.io and earn rewards without the need to set up a validator node. With the growth of ETH staking, it provides passive income opportunities for long-term holders.

Conclusion

The Ethereum merge is a revolutionary event that transforms Ethereum into a more environmentally friendly, scalable, and secure blockchain. By eliminating mining and transitioning to proof of stake, Ethereum is now more efficient and better suited for future upgrades. The PoS system of Ethereum offers new profit opportunities for investors, traders, and stakers, while platforms like Gate.io provide secure ETH trading and staking solutions. With the continuous development of Ethereum, the merge has laid the foundation for a more scalable and decentralized future, making ETH one of the most promising assets in the cryptocurrency space.

Author: Cinnie, Gate.io researcher Translator: Sherry S. *This article only represents the author’s views and does not constitute any trading advice. Investment involves risks, and users should make cautious decisions. *The content of this article is original, and the copyright belongs to Gate.io. If reprinting is required, please indicate the author and source, otherwise, legal responsibility will be pursued.