ETH Merge Risks | Crypto News | What Are Ethereum Merge Risks
158ETH Merge Risks | Crypto News | What Are Ethereum Merge Risks
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Welcome to our ETH Merge Risks Video!
The much talked-about merge represents (without getting too technical) the joining of the existing execution layer of Ethereum (the Mainnet) with its new proof-of-stake consensus layer, the Beacon Chain. It eliminates the need for energy-intensive mining and instead secures the network using staked ETH. Down the line, a more scalable and sustainable Ethereum network should emerge.
While the best-known cryptocurrency, Bitcoin, is deemed a false narrative consuming huge amounts of electricity, the merger will enable Ethereum to take the green path.
Some risks
Although the merge will take about 13 minutes and more than 150 Ethereum developers will be tracking every second of these minutes, there are some risks. The first risk is the risk of centralization and governance. Now that Ethereum is moving towards proof-of-stake, the validators of transactions will no longer be the miners but the stakers of Ethereum.
At the time of writing, 60% of the stake is in hands of four big parties. What will happen if the authorities require these parties to vote against a certain transaction or even vote against a new Ethereum Improvement Proposal?
Another big concern could be scams. The Ethereum network and some other crypto communities have been using the term โETH2โ to refer to the proof-of-stake layer. This could lead to confusion during the merge and scams trying to take advantage of users during this transition by making them believe that they need to take steps to upgrade to ETH2 or swap their current tokens for new ones.
Finally, there are the miners who are left with nothing to mine after the merge. The proof-of-work Ethereum network, known as Mainnet, has relied on miners to validate blockchain transactions for the past years. For years, they have been purchasing expensive equipment to deliver stability and security to the network in return of freshly minted Ethereum.
To recover these incurred costs, they might choose to continue on the old Ethereum chain, the Mainnet. This could lead to a so-called fork which will mean there will be two different Ethereum chains although it is not very probable that this will happen.
Two major parties have already stated they will support the proof-of-stake chain. The biggest oracle network, Chainlink and one the biggest stable coins, USDC by Circle, have announced that they would support the new proof-of-stake chain. It will be an โโadapt or dieโ situation for smaller decentralized applications which have chosen Ethereum as their preferred blockchain. They will either continue with the old Ethereum chain and risk becoming obsolete, or adapt.
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The information contained herein is for informational purposes only. Nothing here shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading cryptocurrencies poses considerable risk of loss. The speaker does not guarantee any particular outcome.
I hope you found value in our ETH Merge Risks video. Make sure to leave a like on the video if you gained value from it!
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โฐ TimeStamps โฐ
00:00 Crypto news Introduction
00:37 Crypto news project summary
12:16 Crypto news project outro