Here’s what you need to know

Ethereum’s long-awaited transition from proof-of-work (PoW) to proof-of-stake (PoS) is upon us, with the merger looming in less than 10 hours. There’s a lot to consider in the broader cryptocurrency space — and here’s what you need to know.

What is integration?

The Ethereum blockchain will move away from its power-based consensus mechanism PoW, as the execution layer integrates with the new PoS consensus Beacon Chain.

Beacon Chain went live in December 2020, allowing ecosystem participants to deposit ETH or become the network’s new validators, replacing PoW miners that were previously employed to process transactions, produce blocks, and secure the network.

In its simplest form, integration makes the Ethereum network use 99% less energy and provides greater scalability, security and sustainability.

Ethereum’s Mainnet (PoW) and Beacon Chain (PoS) are working simultaneously and will eventually merge – hence the name – bringing a new era of smart contract blockchain network. When the new consensus mechanism controls the network, the entire transaction history of Ethereum will be processed.

Who will own the network after the merger?

As explained, users who can share a total of 32 ETH are eligible to become individual verifiers of the Ethereum Beacon Chain. Validators are assigned to randomly generate blocks and validate transactions and blocks created by other validators in the network.

Users can participate in integrated or centralized staking pools by collecting small amounts of ETH, which promise a share of the reward to validate and maintain the network. There are several options to consider for those interested in participating in the network’s new consensus mechanism.

A recent report from blockchain analytics platform Nansen shows that more than 11% of the total circulating ETH is 65% liquid and 35% illiquid. There are a total of 426,000 validators and some 80,000 depositors, but a small group of entities command a large share of ETH.

Three major cryptocurrency exchanges are Coinbase, Kraken, and Binance, which account for nearly 30% of ETH. Lido DAO, the largest merger staking provider, holds the largest share of ETH with a 31% share, while the fifth untagged proof group holds a 23% share of ETH.

Are there possible forks of the Ethereum blockchain?

As previously reported by Cointelegraph, the merger will see ETH, the Ethereum ecosystem’s local currency, remain once the network joins the Beacon Chain. Some PoW miners who have previously mined and maintained the execution layer have indicated that they will continue to do so.

The PoS-powered Ethereum blockchain will continue to use ETH after the merger, while another hypothetical PoW Ethereum network named ETHPOW may stop generating ETHW tokens.

This is being considered by financial service providers that offer exchange-traded products (ETPs) linked to any blockchain-based asset. If there is interest from investors to fork PoW chain exposure, some firms may consider doing that.

Any existing ETPs or currencies do not need to do anything to be exposed to ETH because the ETH will exist when the Beacon Chain implements PoS consensus.

Do I have to do something?

The average Ethereum user and ETH holder do not need to worry about losing their funds or making any changes to selected wallets before the merge. As the whole history of the Ethereum blockchain took place in the transition – all the funds in the wallet are still accessible and safe.

The most important thing – beware of scams. Cointelegraph has compiled a list of the three most popular ways that malicious actors try to exploit a merger event. Scam pools, scams and fake airdrops are being revealed. You don’t need to upgrade your wallet or send your ETH to receive new tokens.