The Merge is coming. Here’s what you need to know

Quick summary

Ethereum is about to hit its biggest milestone since its launch in 2015. This will see it reduce its energy consumption by 99.95% and take a huge step towards greater scalability and economic sustainability. How?

Ethereum is moving away from Proof of Work, a blockchain consensus mechanism (the way a blockchain agrees on what’s happened on the network), in favor of a greener alternative known as Proof of Stake.

This transition is known as ‘The Merge’.

This post explains what it is, why it matters, and how it impacts you as an Argent user.

What is the Merge?

The Merge is the first time a major blockchain has changed consensus mechanism, with Ethereum transitioning from Proof of Work to Proof of Stake. It represents many years of hard work by the Ethereum team, who have rigorously tested a separate Proof of Stake chain running alongside Ethereum called the Beacon Chain. What we call the Merge is when the Beacon Chain merges into the Ethereum blockchain, thereby completing the full transition to Proof of Stake.

What is Proof of Stake?

Instead of using miners like Proof of Work, Proof of Stake uses validators. Validators are responsible for verifying transactions to keep the blockchain moving along. They are randomly selected, and the more validators someone runs, the higher their chances are of getting picked. If a validator acts irresponsibly by not being online enough or if they act maliciously by passing fraudulent transactions, then they’ll lose a percentage or all of their stake through slashing penalties.

Why does The Merge matter?

Proof of Stake offers a range of benefits for Ethereum, the main ones are:

99.95% energy reduction. Ethereum currently uses the energy equivalent of a medium-sized country. The move to Proof of Stake fixes this.

90% reduction in ETH issuance. After the Merge, staked ETH and their rewards can’t be withdrawn until the Shanghai update (est. 6 months). This means no ETH will enter circulation until withdrawals are enabled.

ETH becomes deflationary. Lower issuance, no new ETH entering circulation for 6 months, and EIP-1559 burning transaction fees will decrease the supply of ETH, not increase. If you want to track it, check out https://ultrasound.money.

Staking rewards will increase from 4% to an est. 9-12%. Transitioning to Proof of Stake means transaction fees will no longer go to miners. Instead, fees will go to validators and stakers, meaning higher rewards. You can easily stake in Argent Vault and Argent zkSync.

Sets the stage for future scalability. Proof of Stake will enable scalability updates, like sharding, that were previously impossible under Proof of Work.

For these reasons, we at Argent are incredibly excited about the Merge and will support it in every way possible.

If you want to learn more about the Merge, we highly recommend you listen to our recent Twitter Space, where we went into more detail with our CEO and Co-founder, Itamar, Superphiz, and Anthony Sassano.

How does the Merge impact you?

Argent Vault

There may be some disruption across the Ethereum blockchain during the Merge. So we encourage you to avoid needing to make any important transactions during the upgrade, and we will keep you updated throughout.

Argent zkSync

zkSync will be paused during the Merge. This is expected to last for one hour. Your funds will be safe. You don’t need to do anything.

As a precaution, Ramp will briefly pause transactions during the Merge.

You’ll be unable to buy any Index Coop indexes for 24 hours before and after the Merge. This is a safety measure in place in case of any issues with price feeds. You can still buy and sell on Layer 1, as usual.

Argent X

There may be some disruption across StarkNet during the Merge. Your funds will be safe.

FAQs and Merge misconceptions

Will the Merge Reduce gas fees?

No. The Merge does not reduce gas fees. Gas fees are based on how much the blockchain is used. For cheap and fast transactions, use a Layer 2 like zkSync or StarkNet.

Will the Merge substantially speed up Ethereum? No. There is expected to be a slight improvement in block confirmation times (from ~13.5 to 12 seconds), but this won’t be noticeable. However, Layer 2s and sharding will substantially increase transaction speeds.

Does Proof of Stake make Ethereum more centralized?

No. The move to Proof of Stake will make Ethereum more decentralized.

There are over 400,000 validators distributed across the globe that are securing Ethereum.

How can I help secure Ethereum?

If you have 32 ETH, some money to purchase technical equipment, and some time, you can run a validator. It might sound challenging, but we wrote a non-technical guide back in 2020, which should help you out.

If you don’t have 32 ETH, you can use Lido on Layer 1 or Layer 2 in Argent to help secure the Ethereum.

What is the ETH Proof of Work or ETH PoW fork?

Some miners are unhappy with Ethereum transitioning to Proof of Stake because their equipment will no longer be useful. So they will copy the Ethereum blockchain - also known as ‘forking’ - before the Merge to keep an Ethereum Proof of Work blockchain alive.

Will Argent support ETH PoW?

No. We will not support an ETH PoW.

Aside from being excited about the many benefits that Proof of Stake will provide, we’d need to do lots to support any forks, and it assumes that others would also support the fork.

Tether (USDT), the largest stablecoin, has already stated that they won’t support any ETH PoW forks. That means any ETH PoW USDT will hold no value. If this holds no value, all the DeFi that relies on Tether will have no value. Chainlink, OpenSea, and many other leading dapps have also come out against supporting an ETH PoW fork.

Will I need a new ETH token?

No. You don’t need to swap your ETH for the Proof of Stake version. Instead, your ETH will be automatically updated for you in Argent.