Ethereum merger is imminent, what "butterfly effects" will the crypto world usher in

The Ethereum Bellatrix upgrade will be carried out on the beacon chain on September 6, and the Ethereum merger, which is about to go down in history, has officially entered the countdown stage. As time goes by, all parties involved in the previous debate have entered the final intense preparations. With the Ethereum merger imminent, what technical details and opportunities are worth noting? So how are all parties preparing for the fork? At the same time, this article will focus more on the "butterfly effect" that can be caused by the Ethereum fork.

Ethereum merger is imminent, read more details of the plan

At the beginning of 2021, due to a small mistake by the PoS service provider Staked.us, more than 70 validators on ETH2.0 were collectively slashed. This Ethereum merger is a big deal, and it is very necessary for node operators to further understand the details of the merger. (Note: Slash is a penalty charged from the 32 ETH staked in the node. Any amount of Slash cannot be replaced, and if the node drops below 16 ETH due to the accumulation of Slash penalties, the node will automatically exit the network.)

According to the plan officially announced by Ethereum, the difference between this Ethereum mainnet merger and previous network upgrades is reflected in two aspects: first, node operators need to upgrade their consensus layer (CL) and execution layer (EL) clients in sequence, rather than just upgrading one of the two. Secondly, the upgrade is launched in two phases: the first phase is called Bellatrix, which starts when a certain time period height is reached on the beacon chain; the second phase is called Paris, which starts when the execution layer reaches a certain Total Difficulty value. The Ethereum Foundation has announced a client version that supports the Ethereum mainnet merger upgrade, and reminded node operators that they must run both the execution layer and the consensus layer clients at the same time to ensure that they remain on the Ethereum network during and after the merger.

According to the official plan, the Bellatrix upgrade will be carried out on the beacon chain on September 6th, Coordinated Universal Time (UTC); the execution layer upgrade Paris is expected to be completed between September 10th and 20th, but the exact date of reaching the predetermined total difficulty value depends on the computing power of the proof of work, that is, the hash rate.

During the upgrade period, for geek bounty hunters, this Ethereum upgrade may still be a very good "opportunity to get rich". The Ethereum Foundation also announced in its official blog that it will expand the merge-related bug bounty incentive program to four times the previous amount, with a maximum bounty of $1 million for serious bugs. This move is aimed at encouraging the community to discover potential problems and bugs in The Merge before September 8.

ETHW issues a "declaration of war"

The day of the Ethereum merger is much earlier than most people expected, and many preparations are currently going smoothly. According to Bitpush, on August 31, the twelfth shadow fork of the Ethereum mainnet reached the terminal total difficulty (TTD), and all Nethermind nodes successfully passed the transition. It can be seen that on September 6, the first phase of the Ethereum merger will most likely proceed as scheduled. So, can the fork teams such as ETHW keep up and not fall behind?

ETHW officially released the second code update earlier, enforcing EIP-155 to prevent replay attacks and introducing liquidity pool freezing technology to protect user assets to solve the miner problems caused by the Ethereum upgrade.

On August 30, ETHW Core issued an open letter to the Ethereum community, responding to questions raised by the community: 1. ETHW core members are geeks and crypto investors from all over the world who voluntarily organized to form a community because they believe in PoW; the anonymity of ETHW core members is an imitation and tribute to Bitcoin and other crypto punks; the supervision of the blockchain world will continue to increase, and the development of Web3 is facing pressure. It is wrong to turn Web3 to the PoS mechanism at this time. Ethereum is cautious and stable to maintain the PoW mechanism; Vitalik created Ethereum, but they cannot represent Ethereum. Regarding the view that USDT and USDC do not officially support Ethereum PoW, ETHW officials believe that USDT and USDC themselves only support 8 native public chains, and most other chains do not support them. The stablecoins on those chains are bridged.

Judging from the official updates of ETHW, it has indeed been stepping up technical development since the fork was proposed; objectively speaking, considering the difficulty of Ethereum forks, it is not easy for ETHW Core to complete two technical updates in a short period of time. However, with the rapid pace of Ethereum mergers, if ETHW wants to succeed, it may still need to ensure that it does not make mistakes, and then wait for the merger to have loopholes or fail. At least from the perspective of community attention, there are relatively few supporters at present.

What are the "butterfly effects" caused by the Ethereum merger?

As the first public chain, Ethereum is like the foundation of the crypto world, and the various Dapps built on it are like superstructures. This upgrade of Ethereum's underlying layer will undoubtedly bring a huge shock to the upper layer applications, but no one really knows how high the magnitude of this earthquake will be. What effects will the "butterfly wings" this time have?

From the perspective of the risks brought by the Ethereum upgrade, for DeFi protocols, even if the transition of Ethereum's proof-of-stake mechanism goes smoothly, the merger may slow down transaction times or cause interruptions in DeFi lending protocol services, leading to a plunge in the value of stablecoins and shrinking the DeFi lending pool. If the situation worsens, it may even affect the DeFi liquidity pool. MakerDAO's article further emphasized that Ethereum mergers may cause negative funds, perpetual contract lags, network downtime, replay attacks and other problems. According to Grayscale , the merger may lead to a situation where tokens locked in smart contracts may be locked forever, forcing holders to start liquidating their tokens before the merger. However, most DeFi protocols do not care about these potential problems. Uniswap is one of them, and it said its services will not be interrupted by the merger.

In addition, in the Ethereum merger, it seems that the Ethereum miners are the most injured, but in fact, the first to bleed are the former "chip daddy". On August 26, Nvidia released its second quarter financial report showing that the revenue of mining chip CMP related business of "OEM and other" business decreased by 66% year-on-year. Looking back at the graphics card market in the past, there was a shortage of goods, and even pre-sales were 3 months in advance. Now that Ethereum has not really merged, Nvidia has been seriously injured and bleeding.

From the perspective of the benefits of the Ethereum merger, after the miners' profits are cut, the pie of the Ethereum world will be redistributed. First, according to estimates, Ethereum's electricity expenditure is expected to drop by 99.65%, and DeFi applications no longer have to pay for this fee on the Ethereum network. Should the large amount of miner fees saved be allocated more to liquidity providers or token holders? The interest game behind this will undoubtedly become the focus of controversy after the merger. Recently, Uniswap's "fee switch" proposal has attracted a lot of attention, and after the merger, this may cause widespread discussion again.