The Merge: What does this mean for your ETH on Paymium?

January 5, 2023
5 min reading time
Team Paymium

The Merge, one of the most important events of the year for the Ethereum blockchain and that will give birth to the Ethereum 2.0, is currently being deployed.

🆕 Update Sept, 15 2022:  Update complete.

What does this update change?

In preparation since 2015, the Ethereum Foundation, which governs the eponymous blockchain, has decided to change the security system of its network. It finally abandons the verification mechanism of transactions by "proof-of-work" and adopts the "proof-of-stake".

Proof-of-work and proof-of-stake are protocols that help repel computer attacks aimed at hacking a network. These protocols define a set of rules allowing the validation of network operations. They ensure the security of the network.
With proof-of-work, the "miners" (computers securing by validating transactions and creating new blocks) are rewarded according to the power of their "hashrate" (which is an indicator of the computing power necessary to verify transactions on a blockchain in proof-of-work).

With Proof-of-Stake, "validators" (computers responsible for validating transactions and creating new blocks) are rewarded according to the amount of crypto-currency they place " in the system.

Debates about the superiority of one solution over the other continue to this day. There is no clear consensus.

On the other hand, unlike Bitcoin, which has a decentralized governance model, the issues surrounding the Ethereum network are managed by the Ethereum Foundation, headed by Vitalik Buterin.

Last May, the Ethereum Foundation confirmed the upcoming upgrade of its blockchain to proof of stake.

We are listening to our customers who are also ETH miners. Due to the update of the Ethereum blockchain, a number of them have chosen to continue their mining activity on Ethereum Classic (ETC). For this reason, we have already made the ETC available on Paymium.

Concretely, what does this update imply?

Ethereum already has a proof-of-stake network called Beacon Chain, which was introduced in 2020. Until now, this network is used as a transition network in anticipation of the upgrade. It is not yet used for transaction processing. The full transition of Ethereum to proof-of-stake requires the merging of the Beacon Chain with the main network in proof-of-work (Ethereum "mainnet").

It has been announced that this update will take place without stopping the operation of the Ethereum blockchain.

When will the update take place?

The update is expected to be released around September 15.

On a blockchain, we prefer to count in blocks, rather than days.

It is expected that the update will occur once the difficulty of the last mined block in proof of work has reached a certain milestone. When the difficulty of the last block mined in proof-of-work ("total terminal difficulty" or "TTD") reaches 58,750,000,000,000,000,000,000,000, the next block will be mined in proof-of-stake.

For this reason, there is no clear date for the update, but it is possible to anticipate when the TTD will reach the required milestone to trigger the update.

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