Ethereum Merge Updates. With the Merge scheduled for September… | by Marc Arjoon | Aug, 2022


Source: CoinShares

With the Merge scheduled for September 2022, here are some updates one should be aware of.

Test Net Merge

The Görli test net practice merge is scheduled for this week on the11th of August. This event is the last of many practice runs for the actual merge that will be completed before the real deal. If this runs smoothly then we believe the Merge will be scheduled for September 19th or around that date.

Withdrawing Staked ETH

Currently, staking is a one-way street on Ethereum — you can stake your ETH but you can’t unstake/withdraw. Withdrawals won’t be available for 6–12 months AFTER the Merge but keep in mind the Ethereum Foundation is notorious for delayed delivery so it may even be longer.

When withdrawals are eventually enabled this is a 2-step process, an “exit” stage followed by a “withdrawal stage”. The exit stage is a minimum period of ~26 mins and the withdrawal stage is ~27 hours. This is done on a first-come-first-serve basis so if there is a long queue then the exit stage will take longer but the withdrawal stage is fixed. This specification isn’t finalised, and one should expect some changes and more details when withdrawals are closer to being enabled. When withdrawals are eventually enabled, six stakers can withdraw every 6.4 minutes or about 1,350 per day. These numbers aren’t fixed, and change based on how much ETH is staked (the more staked, the more can leave/exit and vice versa). It should be noted that the queue is the same structure for withdrawing and exiting.

Liquid Staking Providers

For access to liquidity, there are liquid staking derivatives like Lido’s stETH, Rocket Pool’s RPL-ETH, and Obol’s solution. These solutions allow stakers to retain liquidity and also allow for earning staking rewards. Still, there are some trade-offs such as price risk, centralisation risk, smart contract bugs, and the providers take a fee so rewards are reduced.

Lido requires 32 ETH, RPL requires 16 ETH and Obol will require less when launched. Alternatively, these tokens can be purchased on the secondary market.

The Proof of Work fork — ETHPoW

A portion of Ethereum miners have signalled their support for forking the Ethereum chain into one that does not upgrade to Proof of Stake but instead remains on Proof of Work (PoW). From a technical point of view, this fork will not affect the current Ethereum chain or the upgraded ETH2. There may be some increased price volatility but there are no direct on-chain risks.

However, ETH2 will likely win because:

1) It has more social backing — from the Ethereum Foundation and the wider Ethereum community (as evidenced by social media and the fall in GPU prices). Stablecrypto-coin issuers will have to choose a chain and will almost certainly stick with ETH2 for reputation, and regulatory reasons.

2) All wrapped assets, like WBTC, RenBTC, wrapped Sol, etc. would lose their value as they won’t be redeemable for the underlying asset.

3) The new PoW fork would need a hard fork to remove the difficulty bomb from the code (the bomb makes PoW unusable). This means developers, client teams, and 3rd party support (which isn’t too hard but quality matters).

4) Under ETHPoW, all of the staked eETH and rewards would be unretrievable or unable to be distributed in an appropriate manner and would also require a hard fork.

This is not to say exchanges won’t list ETHPoW if/when it forks and could be a form of dividend for ETH holders to sell into ETH. However, with all of the messiness involved, I don’t see ETHPoW being close in price to ETH2.



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