eToro informs clients of potential impact of Ethereum’s upcoming Merge
Online broker eToro today published a notice to its clients regarding the potential impact of Ethereum’s upcoming Merge.
Ethereum is expected to move to proof-of-stake around September 15th, 2022, and many are hopeful that the transition could increase the cryptoasset’s investment potential. eToro tells its clients that no action is required, and all of their assets held on eToro will remain secure during this period.
The Merge is Ethereum’s shift from proof-of-work to proof-of-stake. Specifically, it is the ‘merging’ of two independent blockchains that are currently running in parallel: the existing execution layer of Ethereum (the Mainnet we use today) and the new proof-of-stake consensus layer, the Beacon Chain.
Ethereum is currently expected to complete the Merge around September 15th, 2022.
Proof-of-work and proof-of-stake are the two main consensus mechanisms used to verify transactions and add blocks to the blockchain. Ethereum is currently based on proof-of-work (the same consensus mechanism as Bitcoin) but has long been planning to move to proof-of-stake.
The Merge will finalize the transition to proof-of-stake and completely eliminate proof-of-work mining on Ethereum. In the process, it is expected to reduce Ethereum’s energy consumption by more than 99% — alleviating environmental concerns and potentially making the cryptoasset more attractive to investors.
In addition, The Merge is expected to reduce the issuance of new ETH and make the cryptoasset more deflationary.
Finally, The Merge is also expected to help unlock more use cases and drive more investment in Ethereum. Although it won’t immediately lower gas fees or increase transaction speeds, it will lay the technical foundation for the blockchain to continue delivering on its scalability roadmap, and ultimately overcome the bottlenecks that until now have curbed widespread adoption.
If the Ethereum network becomes unstable, eToro may temporarily pause Ethereum (ETH) and ERC-20 token deposits and withdrawals.
As things currently stand, the Merge will not change anything for eToro users who have staked ETH. eToro will be on high alert during the Merge to ensure that services are not negatively impacted, and will ensure full communication should anything unusual occur.
Staked ETH will remain locked until the next Shanghai upgrade goes live, loosely speculated to occur during the first half of 2023. Staked ETH is only expected to be unlocked after the Shanghai event, not at the time of the Merge.
As the Merge represents a hard fork for Ethereum, it could potentially result in a new blockchain and new forked tokens. eToro will evaluate any potential forks on a case by case basis.