Ethereum is about to experience the biggest upgrade in the history of blockchain (literally!). It’s called “The Merge,” and it’s something the Ethereum community has been waiting for since 2015 but what is the Ethereum Merge and how will it impact Uphold users?
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What is the Ethereum Merge?
The Merge represents the transition of the Ethereum blockchain from Proof of Work (PoW) to Proof of Stake (PoS). Proof of Work uses computational power (and thus energy) to validate transactions and “mine” new blocks on the blockchain. The new consensus mechanism achieves the same results in terms of validation and security but at a fraction of the energy cost (-99.9%).
The event is called The Merge because it represents the merging of 2 separate blockchains – the Ethereum Mainnet (PoW), and a parallel blockchain called the Beacon Chain (PoS). The Merge is one (major) step in a multi-step process to make the transition from PoW to PoS as smooth as possible. Because the Beacon Chain has no transactions on it, all data from the Ethereum Mainnet can be moved over without any conflicts.
The Merge reduces the issuance of ETH each year by about 90% – from 4.3% issuance to 0.43%. Because of the cost efficiencies with Proof of Stake, less ETH is needed in order to provide security to the network, and this lower inflation rate can only be seen as bullish for ETH in the long-term. An additional bullish factor is the reduction in selling pressure from the parties validating transactions. With Proof of Work, miners need to regularly sell ETH to pay for their energy costs, but this is unnecessary with Proof of Stake, and because of this, an estimated $7.5B per year of ETH sell pressure will disappear overnight.
In addition to the decrease in energy consumption and ETH issuance rate, the move to Proof of Stake makes ETH a native-yield bearing asset. This means anyone who stakes their ETH to the Beacon Chain can generate yields between 5-7% per year (we’ll know the exact number after the event).
When was The Ethereum Merge?
The Merge officially took place on September 15th, 2022 at 6:42:42 AM UTC.
How will The Merge impact Uphold users?
If you hold ETH on Uphold, there is nothing you need to do. Your holdings will remain securely in your wallet and available to trade.
Uphold will pause deposits and withdrawals of ETH and all ERC-20 tokens a few hours before and after The Merge. As a precautionary measure, deposits and withdrawals will also be paused on GPU mining chains, like DOGE and BTG.
Will ETH trading be interrupted by The Merge?
No, the ability to trade will remain enabled throughout the transition.
Will ETH staking be affected by The Merge?
No, your staking positions will remain unaffected during and after The Merge.
While we cannot predict the exact increase in staking rewards from The Merge, Uphold will pass 100% of additional rewards to Customers.
There is not yet an official way to unstake and withdraw ETH until the Ethereum blockchain supports it. This is expected to happen as part of the next major upgrade 6-12 months following The Merge – also referred to as the “Shanghai” upgrade. In the meantime, Uphold will continue to support unstaking requests by matching them, where possible, with staking requests from other Customers.
What if I want to keep my ETH PoW coins?
Uphold will not be supporting the PoW chain, or any airdrops associated with it. Therefore, if you’d like to keep your ETH tokens from the PoW chain, you must withdraw them before we close withdrawals prior to The Merge.
Be aware of scams!
During this period, we expect an increase in attempts by scammers, posing as Uphold, to convince Customers to transfer their ETH off the platform to benefit from the “upgrade” in some way.
Please be vigilant for any suspicious activity and help protect the community by passing such attempts on to us here.
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