Top 6 Misconceptions of The Ethereum's Merge

The merge of Ethereum network is expected to take place on either 15th or 16th September 2022

It's the long-awaited, long-delayed shift of Ethereum's consensus mechanism from Proof-of-Work (POW) to Proof-of-Stake (POS). 

It is also one of the biggest milestones in crypto history since the genesis of Bitcoin.

Currently, Ethereum has both a POW and POS chain running in parallel. The Merge will involve the “merging” of Ethereum’s current blockchain (the execution layer) with the Beacon Chain (the consensus layer), which has been up in parallel with the Mainnet since 1st December 2020. 

While both chains have validators, only the POW chain currently processes users’ transactions. Once the merge is completed, Ethereum’s blockchain will shift fully to the POS chain, making mining obsolete. 

Ethereum's Foundation claims the move to POS will reduce energy usage by a whopping 99.5%. Thus many experts are expecting wider adoption of Ethereum by ESG (Environmental, Social Governance) conscious institutions post-merge, as POS will eliminate the need for energy-intensive mining (again, we would like to highlight that energy usage of POW is a feature, not a bug for Bitcoin), relying on staked eth to secure the network instead.

Here are the top 6 misconceptions about the merge that you should be aware of.

1) The Ethereum Gas Fee Will Go Down

No, it won't. The merge won't lower the gas fee (transaction fee). Its main goal is to shift the Ethereum consensus mechanism from POW to POS. For the gas fee to drop on the Mainnet (Layer 1), it will require scaling the throughput of the network via the coming upgrade after "The Merge", codename as "The Surge". However, after the Merge, Ethereum’s block time does get marginally faster, from 13.3 seconds average block time to 12 seconds.

2) You Can Withdraw Staked Ethereum After The Merge

No, you can't. In fact, you can only withdraw your staked Ethereum 6 to 12 months after "The Merge", which is going to take place in the "Shanghai" update. There are more than 13 millions Ethereum being staked on the beacon chain now. and only ~40,000 ETH will be allowed for withdrawal per day after the "Shanghai" update.

3) The Merge Won't Impact The Tokenomics

No, it will. The merge will massively lower the issuance of new Ethereum, decreasing its supply by more than 90%, also known as "Triple Halving" (The effect is equivalent to three Bitcoin halvings), the inflation rate will go down to 0.4% from the existing 4.3%  (~15000 ETH to about ~1500 ETH per day) The Merge also made ETH as a native yield-bearing asset for stakers, and the interest of the staked ETH will increase from 4.2% to 5%+.

4) The Ethereum Will Have a New Token

No, it won't. The merge was previously referred to as “Ethereum 2.0” or “Eth2.” In January 2020,  this labeling was phased out by the Ethereum Foundation. Warning, scammers might try to take advantage of the naming confusion to convince users that there would be a new “Eth2” token separate from ETH, which is false. 

5) You Need 32 Ethereum to Run a Node

It depends on the type of Nodes. There are 2 types of nodes, if you plan to run a validator node (better understood as block producer), then you will need at least 32 ETH to do that (below explained by @toghrulmaharram). Validator nodes can produce blocks on Ethereum networks and earn staking rewards. However, non-validator node does not require 32 ETH to do that, anyone can run the node with the hardware than runs the ETH client and this is very important for decentralization.

 

The 32 ETH stake size requirement is a compromise imposed by the messaging overhead of Gasper, the consensus mechanism utilized by Ethereum.

Or more concretely, Casper FFG, the finality gadget of Gasper.

What is a finality gadget?

Gasper can be conceptually split into two /2

— Toghrul Maharramov📜 🇺🇦 (@toghrulmaharram) May 29, 2022

6) Users Will Need to Do Some Work to Perform the Upgrade

No, you don't. Ethereum users and holders (basically all regular end users) will just use Ethereum as usual and nothing is required from your end. You don't need to download anything nor click on any button to perform any upgrade - NONE required. Beware of any ETH2 scam that might be lurking around the corners. Only people running validators, infrastructure providers, DEFI developers etc will need to pay attention to the changes coming.

Source: Dragon Ball Fusion Dance

Here's a list of major update follows The Merge.

1. The Merge - The transition from Proof of Work to Proof of Stake 
2. The Surge - This phase will bring sharding (scaling solution) that would break the network into separate partitions called “shards,” designed to spread the computational load on the mainnet.
3. The Verge - This phase will introduce “verkle trees", basicaly an upgrade to Merkle proofs and is intended to optimize data storage for Ethereum nodes.
4. The Purge - This phase will reduce both hard drive space that's required for the vaildators and network congestion. 
5. The Splurge - This is the final upgrade in the pipeline and is designed to deliver a string of miscellaneous updates that are made to ensure the overall smoothness of how the network runs  

At the end of this roadmap, Ethereum will be able to process 100,000 transactions per second. This is the goal Vitalik Buterin aspire to achieve in terms of scalability with all these upgrades. To put this into perspective, at Ethereum’s current capacity, it can only process in average 13 to 15 TPS.