The most significant event in crypto history: The Merge
This mega-thread will cover ๐งต;
- What is The Merge?
- Why is it called The Merge?
- When is The Merge?
- The Merge misconceptions
- $ETH Impact
- How to prepare for the new PoW chain
This mega-thread will cover ๐งต;
- What is The Merge?
- Why is it called The Merge?
- When is The Merge?
- The Merge misconceptions
- $ETH Impact
- How to prepare for the new PoW chain
1/x What is The Merge?
In short: Transition from the current consensus mechanism, Proof-of-Work (PoW) to Proof-of-Stake (PoS)
In short: Transition from the current consensus mechanism, Proof-of-Work (PoW) to Proof-of-Stake (PoS)
2/x Why is it called The Merge?
Two independent blockchains (PoW chain and PoS chain, named Beacon Chain) will be merged.
Three significant testnets have already merged into their testnets to PoS, which gives people confidence about this transition.
Two independent blockchains (PoW chain and PoS chain, named Beacon Chain) will be merged.
Three significant testnets have already merged into their testnets to PoS, which gives people confidence about this transition.
3/x Why is it called The Merge? (Cont.)
Beacon Chain launched in Dec 2020, with no transaction, token, dApp, etc.
It's just an empty chain that runs by PoS so it can merge with the current PoW chain.
Beacon Chain launched in Dec 2020, with no transaction, token, dApp, etc.
It's just an empty chain that runs by PoS so it can merge with the current PoW chain.
4/x When is The Merge?
Once TTD 58750000000000000000000 is confirmed, which will be Sep 14th-16th, approximately.
Source: token.unlocks.app
Once TTD 58750000000000000000000 is confirmed, which will be Sep 14th-16th, approximately.
Source: token.unlocks.app
5/x The Merge Misconceptions โ
"The Merge will reduce gas fees." FALSE โ
The Merge is a change of consensus mechanism. It will be lower after the sharding upgrade.
"The Merge will reduce gas fees." FALSE โ
The Merge is a change of consensus mechanism. It will be lower after the sharding upgrade.
6/x The Merge Misconceptions โ (Cont.)
"Transactions will be noticeably faster after The Merge."
FALSE โ
The Merge will slightly increase transaction speed. On PoW, there are 13.66 seconds per block on average.
After The Merge, it will be 12 seconds per block (10% faster)
"Transactions will be noticeably faster after The Merge."
FALSE โ
The Merge will slightly increase transaction speed. On PoW, there are 13.66 seconds per block on average.
After The Merge, it will be 12 seconds per block (10% faster)
7/x The Merge Misconceptions โ (Cont.)
"Staked $ETH can be withdrawn once The Merge occurs."
FALSE โ
Staked $ETH will be available to be withdrawn after the Shanghai Fork upgrade, which will be 6-12 months after The Merge.
"Staked $ETH can be withdrawn once The Merge occurs."
FALSE โ
Staked $ETH will be available to be withdrawn after the Shanghai Fork upgrade, which will be 6-12 months after The Merge.
8/x The Merge Misconceptions โ (Cont.)
"Staking APR is expected to triple after The Merge."
FALSE โ
The estimation of staking reward predicts a 50% increase in APR, not a 200% increase which leads staking APR to be ~7%, approximately.
"Staking APR is expected to triple after The Merge."
FALSE โ
The estimation of staking reward predicts a 50% increase in APR, not a 200% increase which leads staking APR to be ~7%, approximately.
9/x $ETH Impact ๐ฅ
Economics of $ETH will be significantly impacted post-Merge As there is no reward paid to miners, the $ETH issuance will be reduced by 90%, from 4.3% to 0.43%
Economics of $ETH will be significantly impacted post-Merge As there is no reward paid to miners, the $ETH issuance will be reduced by 90%, from 4.3% to 0.43%
10/x $ETH Impact ๐ฅ (Cont.)
The design of POS is to provide the highest level of blockchain security for the lowest cost. As a result, these savings are passed on to $ETH holders instead of miners.
The design of POS is to provide the highest level of blockchain security for the lowest cost. As a result, these savings are passed on to $ETH holders instead of miners.
11/x $ETH Impact ๐ฅ (Cont.)
There is no sell pressure from $ETH miners because, for miners, $ETH used to be sold to cover their electricity bill, which $ETH staker does not have. This remove ~$7.5bn sell pressure annually. Finally, $ETH will become a deflationary asset.
There is no sell pressure from $ETH miners because, for miners, $ETH used to be sold to cover their electricity bill, which $ETH staker does not have. This remove ~$7.5bn sell pressure annually. Finally, $ETH will become a deflationary asset.
12/x How to prepare for The Merge?
The transition from PoW to PoS leads numerous miners to lose their income. The hard fork is the answer for them to keep miners running. There will be a new PoW chain by hard forking everything on the current mainnet when The Merge occurs.
The transition from PoW to PoS leads numerous miners to lose their income. The hard fork is the answer for them to keep miners running. There will be a new PoW chain by hard forking everything on the current mainnet when The Merge occurs.
13/x
The new Ethereum POW chain copied everything on-chain, native token $ETH, dApps, NFT, etc. Although everything has been copied, there is no off-chain resource support such as infrastructures, humans, real-world assets, etc.
The new Ethereum POW chain copied everything on-chain, native token $ETH, dApps, NFT, etc. Although everything has been copied, there is no off-chain resource support such as infrastructures, humans, real-world assets, etc.
14/x
Some of the tokens would be affected by the new PoW chain.
- Stable Coin ( $USDT, $USDC )
- Liquid Staking Token ($stETH, $rETH )
Some of the tokens would be affected by the new PoW chain.
- Stable Coin ( $USDT, $USDC )
- Liquid Staking Token ($stETH, $rETH )
15/x Stablecoin ๐ช
If there are $1,000 $USDT Pre-Merge sitting in the wallet, After the hard fork, there will be 1,000 $USDT on the PoS chain and $1,000 $USDT on the PoW chain. However, real-world assets that back $USDT is not increased.
If there are $1,000 $USDT Pre-Merge sitting in the wallet, After the hard fork, there will be 1,000 $USDT on the PoS chain and $1,000 $USDT on the PoW chain. However, real-world assets that back $USDT is not increased.
16/x
Theoretically, either $USDT or $USDC on the PoW chain has no value.
Moreover, the value of $DAI, which has $USDC backed by more than 50%, will also be affected.
Imagine how liquidation would be if stablecoins had been putting on lending protocol ๐คฏ
Theoretically, either $USDT or $USDC on the PoW chain has no value.
Moreover, the value of $DAI, which has $USDC backed by more than 50%, will also be affected.
Imagine how liquidation would be if stablecoins had been putting on lending protocol ๐คฏ
17/x Liquid Staking Token ๐ง
Another group that will be got affected on the PoW chain such as $stETH from @LidoFinance or $rETH from @Rocket_Pool
Staked $ETH will be able to redeem once the Shanghai event occurs, which is expected to be after the transition to PoS 6~12 months.
Another group that will be got affected on the PoW chain such as $stETH from @LidoFinance or $rETH from @Rocket_Pool
Staked $ETH will be able to redeem once the Shanghai event occurs, which is expected to be after the transition to PoS 6~12 months.
18/x
For the new PoW chain, the staked $ETH will not be able to redeem forever. So, the value of the liquid staking token will be zero.
Ideally, It will affect many other tokens.
For the new PoW chain, the staked $ETH will not be able to redeem forever. So, the value of the liquid staking token will be zero.
Ideally, It will affect many other tokens.
19/x
If miners believe in PoW and still operating, this will make the PoW chain survive. Although PoW on Ethereum has a successful story and has supported billions of value for many years, it does not mean the PoS chain will fail.
If miners believe in PoW and still operating, this will make the PoW chain survive. Although PoW on Ethereum has a successful story and has supported billions of value for many years, it does not mean the PoS chain will fail.
20/x
So, It is better to keep $ETH in a non-custodial wallet or The PoS chain supported exchange.
So, It is better to keep $ETH in a non-custodial wallet or The PoS chain supported exchange.
21/x
If you've enjoyed the thread thus far, please go to the first tweet and RT ๐
Follow @Token_Unlocks for Tokenomics-related news and updates. ๐โค๏ธ
If you've enjoyed the thread thus far, please go to the first tweet and RT ๐
Follow @Token_Unlocks for Tokenomics-related news and updates. ๐โค๏ธ
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