7 Misconceptions about The Ethereum Merge

Published September 28th, 2022 - 08:15 GMT
7 Misconceptions about The Ethereum Merge
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From social media to mainstream media, misconceptions about the Ethereum Merge abounded over these most transformational moments in the short history of blockchain technology. 

7 Misconceptions about The Ethereum Merge

While the crypto community has been ecstatic about Ethereum's transition from energy-intensive proof-of-work to environmentally friendly proof-of-stake, a few people in the community got a little too excited, there are a few misconceptions that investors should be aware of. To help moderate expectations, we've complied a of 7 misconceptions about the Merge.

7 Misconceptions about The Ethereum Merge

  1. The Merge Didn't Result in a “New” Token or ETH2

Though post-Merge Ethereum was initially known as Ethereum 2.0 or Eth2, this terminology has subsequently been phased out in favor of simply calling it "Ethereum." However, the old names have persisted, creating the myth that there would be a new ETH2 coin.

Scammers took advantage of the ambiguity surrounding the term 'Eth2' in the run-up to The Merge to try to deceive users into exchanging their ETH for an 'ETH2' token. According to the Ethereum Foundation website, there is no 'ETH2,' and The Merge introduced no new legal token.

There will be no ETH2, so don't fall for any fraud!

  1. The Merge Won’t Make Gas Fees Less Pricey

Many people truly believe that Ethereum's switch to proof-of-stake will reduce the network's high gas prices, which emerge during periods of congestion.

However, The Merge will not affect the Ethereum network's throughput, which means that those who pay greater fees will still have their transactions included in the network's limited block space first. No network capacity expansions here!

  1. The Merge Won’t Make The Transactions Fasters

Although Ethereum transactions will most likely not be noticeably faster. However, there is some validity to this claim, as Beacon Chain permits validators to publish a block every 12 seconds, which is faster a bit as it takes approximately 13.3 seconds on the mainnet.

While Ethereum experts anticipate that switching to proof of stake (PoS) will result in a 10% increase in block generation, users are unlikely to notice the minor difference.

  1. Staked ETH Can be Withdrawen

Staked ETH (stETH) is currently locked on the Beacon Chain and is crypto-backed 1:1 by Ether (ETH). While stakers would prefer to be able to withdraw their stETH holdings; however, the development community has stated that the upgrade does not allow for this adjustment.

Withdrawal of stETH holdings will be enabled by the Shanghai upgrade, the next important upgrade after the Merge. As a result, the staked assets will be unavailable for usage for at least 6 to 12 months following the merge.

Because these funds will be illiquid for six to twelve months after the Merge, Ethereum "hodlers" who want to stake ETH will need diamond hands until then. 

There are currently about 10 million ETH staked, but only about 43,200 ETH will be able to be transferred per day.

  1. ETH Rewards Can’t Be Withdrawaled til the Shanghai Upgrade

While investors will be unable to withdraw stETH until after the Shangai upgrade, validators will have immediate access to the fee rewards and maximum extractable value (MEV) earned during block proposals from the execution layer or Ethereum mainnet.

Because it will not be made up of newly created tokens, the fee reimbursement will be available to the validator immediately.

  1. Running an Ethereum node will require 32 ETH

Running an Ethereum node is completely free. Anyone, both pre- and post-Merge, can sync their own self-verified copy of the Ethereum blockchain.

The confusion derives from the also-false idea that you need a minimum of 32 to stake in post-Merge Ethereum – a requirement that can be easily bypassed by joining a staking pool.

  1. ETH staking APR will increase dramatically post-Merge

There has been a lot of speculation that the APR for the staked ETH may triple following The Merge. However, current predictions are a little more conservative, with a growth of roughly 50% from present levels.

Transaction fees shifting from miners to validators will cause the APR to rise. However, another popular misconception is that the APR hike will be caused by an increase in ETH issuance which is not true as a total of 13,000 Ethereum are paid out to miners each day using proof of work(PoW). The Ethereum Foundation has stated that this number will be decreased by 90% when Ethereum switches to PoS. As a result, 1,600 Ethereum will be awarded daily to all stakers. 

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