Bitcoin Store will support Ethereum Merge, a transition to Proof-of-Stake
The long-awaited Ethereum 2.0 is coming. Here is what it means for the ETH holders and how Bitcoin Store will support the process.
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After years of delay, Ethereum will finally get the biggest software update. The update known as Ethereum Merge will help the Ethereum network transition to a more scalable and energy-efficient infrastructure.
The main Ethereum network will be replaced by a new Beacon Chain bringing new features. The entire process is very technical, but you can read everything about it on the Ethereum foundation's official website: The Merge
What is Ethereum Merge and why it’s important?
To explain this upgrade easily, picture Ethereum as a Formula 1 car. The new Beacon Chain represents a new and more efficient engine than the current one (the current Ethereum chain). In this process, the old engine will be replaced mid-race. The new engine will save more fuel and be more environmentally friendly.
The Ethereum network currently uses a Proof-of-Work (PoW) consensus mechanism. Once the Beacon Chain replaces the current network, Ethereum will switch to Proof-of-Stake (PoS) consensus mechanism.
What is the difference between Proof-of-Work vs. Proof-of-Stake?
Every blockchain network uses a consensus mechanism. This "tool" helps validate transactions and ensures that the blockchain network operates seamlessly.
The consensus mechanism is vital because it replaces central institutions like banks or payment processors in validating information.
In decentralized projects, the consensus mechanism ensures that users don't spend money they don't have and act honestly.
Every blockchain network usually uses two types of consensus mechanisms:
- Proof-of-Work (PoW)
- Proof-of-Stake (PoS)
Proof-of-Work is the concept that came along with Bitcoin - the first cryptocurrency. This consensus mechanism verifies transactions and adds the new block to the existing blockchain. To do that requires user computers (miners) to solve complex cryptographic computations.
The user/miner who solves the cryptographic puzzle will be selected to process the transaction and add a new block to the blockchain. The miner will also receive a reward in the form of cryptocurrency for all the work.
Many believe this mechanism is not fair because the users with more robust computers have a better shot at solving the puzzle.
Additionally, this method consumes a lot of energy. For example, Ethereum PoW consumes the same power yearly as some countries.
The alternative mechanism is Proof-of-Stake.
It is similar to Proof-of-Work, but it consumes less energy. In Proof-of-Work, you must have a strong computer to be a validator. PoS users who want to become validators and process transactions are randomly selected.
Instead of using computing power, the miner has to stake its cryptocurrency to have a chance to verify transactions.
Once the miners get selected to verify the transaction and add a new block to the blockchain, they will receive some amount of cryptocurrency.
This process only works if they confirm the accurate information. The validators will lose the previously staked cryptocurrency if they want to act fraudulently.
How will Bitcoin Store support The Merge?
Although there is not a fixed date yet, it is expected that the Ethereum Merge will take place in mid-September in two phases:
- Phase 1 - Bellatrix upgrade that will happen on September 6th from 11:00 hours
- Phase 2 - Paris upgrade that will occur on September 15th from 00:30 hours
*The exact date depends on the hash rate and the success of the final test merge.
Once the upgrade happens, the network could split into two different networks.
This is a process that is known as “Hard fork”.
If the fork happens, there is a possibility that a new token will be created. In that case, the “ETH” ticker on Bitcoin Store will refer to the new Ethereum PoS chain.
Bitcoin Store will distribute the forked tokens according to a snapshot of the user’s balance on the Bitcoin Store Wallet.
Withdrawals and deposits on the Ethereum network will be suspended a few hours before the Merge to ensure the safety of funds. Once we’ve verified that the PoS network is safe, we will enable deposits and withdrawals again.
We will pay close attention to the updates coming from the Ethereum foundation, and we will update you frequently about all the changes that may occur.
ETH and ERC-20 tokens deposits and withdrawals will be paused on the following:
- 06.09. during the Bellatrix upgrade
- 15.09. during the Paris upgrade
Please ensure that you leave enough time for ETH and ERC-20 tokens to be fully processed before the listed dates.
What will happen after the Ethereum Merge?
There are two possible scenarios:
After a successful upgrade, the existing ETH will remain, which means there will be no new tokens. In this case, Bitcoin Store will immediately enable deposits and withdrawals of ETH and ERC-20 tokens.
Ethereum will split into two networks through the process, which means the new network will have a new token.
ETH ticker will be assigned to the new Proof-of-Stake network.
Bitcoin Store users will receive a new token on their wallet in a 1:1 ratio based on the user's snapshot before the "Paris" upgrade.
The Bitcoin Store will carefully monitor all Ethereum Foundation news and notify all users about the changes in a timely manner.
Bitcoin Store reserves the right to update the treatment of the chain split in a further announcement.
It is essential to know the following:
Unprocessed ETH deposits and pending ETH withdrawals will not count towards the Bitcoin Store Wallet balance before the Paris upgrade.
How will Ethereum merge affect me as a Bitcoin Store user?
As a Bitcoin Store user, you don’t have to do anything. Your cryptocurrencies will remain safe and secure on your Bitcoin Store Wallet. All funds will transfer over after the Ethereum merge, and your ether cryptocurrency will still appear as ETH in your Bitcoin Store Wallet.
Please note that Bitcoin Store will temporarily pause ETH and ERC-20 token deposits and withdrawals until the merge is complete.
Bitcoin Store users should be wary of possible scam attempts. Scammers could potentially offer various opportunities to “buy ETH2” tokens or “transfer tokens to an unknown address in order to “complete the token upgrade”.
Bitcoin Store will never ask users to send funds in this manner.
Note: This announcement was updated on 02/09/2022. Bitcoin Store reserves the right in its sole discretion to amend or change or cancel this announcement at any time and for any reasons without prior notice.
Risk warning: Bitcoin Store is not a consulting firm and as such is not authorized to provide financial and investment advice. Our opinions, analysis and other content on the website are for informational purposes only and cannot be considered a basis for investment. Cryptocurrency trading is speculative. Prices can change quickly, which can lead to a loss of investment. Before you start investing in cryptocurrencies, seek independent advice and be well informed about the potential risks associated with this type of financial instrument. Bitcoin Store is the brand name of Digital Assets d.o.o. established in the Republic of Croatia. Digital Assets d.o.o. is a regulated company for the provision of services for the purchase, sale, storage and use of cryptocurrencies for payment by the Croatian Financial Services Supervisory Agency (HANFA).