How to Safely Navigate the Ethereum Merge
|— The Merge refers to Ethereum’s much-anticipated transition from a proof-of-work (POW) to a proof-of-stake (POS) consensus.
— Delayed multiple times, the Merge is finally set to take place in September 2022. Though the Merge is a key stepping-stone for the Ethereum scalability roadmap, it’s unlikely to have a significant impact on how most people use Ethereum in the short term.
— Watch out for scams, scammers might try to take advantage of the confusion surrounding the Merge to steal your private keys. You do NOT need your 24-word recovery phrase for anything related to the Merge.
Here we explain the impact of the coming Ethereum merge – are you ready?!
The Ethereum Merge is arguably the most significant event in the history of Ethereum to date.
Long promised but many times delayed, the Merge is finally coming to Ethereum and will bring significant changes to the way the Ethereum blockchain works under the hood.
But, what exactly is the Merge, and, most importantly, how does it affect Ledger users?
We break it down for you!
What Is the Merge?
The Merge is strictly designed to change the way the Ethereum network comes to consensus. In the blockchain world, consensus refers to how a blockchain produces and orders new blocks of transactions.
Ethereum currently uses proof-of-work (POW) to reach consensus, which entails the network’s miners using enormous amounts of energy as they “mine” new blocks of transactions. Though very secure, POW is very energy-intensive and scales badly – the more people that are using the network, the more work is required for transactions to be carried out, making it cumbersome, slow and very expensive to use as a means of managing transfers of value. Check out our article on the blockchain trilemma for a bit more about that.
However, after the Merge, Ethereum will adopt proof-of-stake (POS) as its new consensus mechanism. This means that instead of using the energy-intensive mining process to process new blocks of transactions, the blockchain will simply select validators based on how much Ether they have staked on the network.
It’s expected that the transition to POS will pave the way for future upgrades that will significantly improve the speed and performance of the network.
But these upgrades are still a long way ahead so it’s important to focus on the immediate benefits the Merge will bring.
First… we shall Merge.
When Will the Merge Happen?
The Merge is currently scheduled to happen around September 15, 2022. The exact time is not known because the Merge will automatically trigger once enough “work” has been accumulated in the network. Work (also known as difficulty) refers to how much computing power (or hashrate) has been invested by Ethereum miners into creating new blocks.
Once total difficulty reaches 58750000000000000000000 hashes, the Merge will be initiated: POW will wind down, POS will activate and become the de facto new consensus mechanism for the Ethereum network.
You can track the exact time of the Merge by using this tool.
Ok, but What Does It Mean for Me?
Though the Merge is a significant milestone for the Ethereum project, it’s unlikely that you will notice any significant difference in your daily use of the network.
The Merge is not designed to scale Ethereum. It will not make Ethereum cheaper or faster to use. In a nutshell, Ethereum after the Merge will mostly behave like Ethereum before the Merge.
There are however some key security items to keep in mind as we approach the Merge.
Let’s take a look at them.
How To Stay Safe Throughout the Merge
Beware of scams and Ledger impersonators. Important events like the Merge are a magnet for scammers trying to take advantage of FOMO and confusion to steal your private keys.
Fortunately, these simple rules can keep you safe:
- You do NOT need your 24-word recovery phrase for anything related to the Merge. Ledger will NEVER ask you for your phrase.
- Your accounts or funds do NOT need to be migrated, transferred, synchronized or upgraded before, during, or after the Merge.
- Similarly, beware of anyone promising you an ETH2 coin airdrop. The Merge is NOT an airdrop. If someone is promising you an airdrop, they’re probably trying to scam you.
- It’s completely safe to keep your ETH, tokens and NFTs inside of your Ledger Ethereum wallet. The Merge will not affect them.
- We recommend avoiding high-value transactions (ETH, tokens and NFTs) during the Merge. This is a security precaution in case the Merge proves a bit more… chaotic than expected.
With that in mind, let’s look at the main benefit the Merge will bring for some Ethereum users: solo-staking.
Will I Be Able To Stake ETH After the Merge?
After the Merge, anyone holding 32 ETH or more will be able to solo-stake their funds and become a validating node (or validator).
Validators provide an important service to the network. They create new blocks of transactions and attest (validate) blocks created by other validators. In exchange for their work, validators are rewarded with passive ETH rewards paid directly to their account by the Ethereum network.
But there is a catch.
Validating is a big responsibility. Validators need to keep their nodes online and up-to-date at all times. Malicious validators acting against the rules of the network can even be punished (slashed) and lose a large portion of their ETH stake.
Though Ledger Live will not support solo-staking your ETH right after the Merge, the official Ethereum.org website has excellent documentation on how to set up your own validator.
Speaking of Lido…
“I hold Lido stETH tokens in my Ethereum account, do I need to do anything?”
No, it’s completely safe to keep your stETH in your Ledger Ethereum wallet. The Merge will not affect Lido nor stETH and you will continue receiving daily rewards as usual. In addition, the price of stETH will continue to follow the price of Ethereum as before.
What To Expect Post Merge?
Finally, to properly prepare you for what’s to come, here are a few more things to keep in mind as we approach the Merge.
- The Ledger Live app and Ethereum (ETH) app installed on your Ledger device will most likely require an update to stay compatible with Ethereum post-Merge.
- This update targets Ledger software that lives on your computer, phone and Ledger device and NOT your funds or accounts.
- This update will NOT require using your 24-word recovery phrase.
- If an update is required, we will share safe links and detailed instructions for you to proceed safely. Again, beware of scammers.
Still confused? No problems, we’ve got your back!
Reach out to our Support team via the Help button on our Help Center or on Twitter @Ledger_Support. We’ll be happy to answer your question and help you safely navigate this key moment in the history of Ethereum.
Stay safe and enjoy the Merge!