Ethereum currently has 2 chains. First, there’s the main proof-of-work chain, let’s call it ETH1. Then there’s the new proof-of-stake chain, ETH2. Soon, they’re going to merge. Ethereum will be back to a single chain.
Blockdaemon has prepared an overview of the Top 3 Opportunities for Financial Institutions to understand the opportunities that lie with Ethereum 2.0.
Ethereum will bring the ETH1 blockchain ledger onto the ETH2 chain. This will keep the ETH1 chain ledger intact but switch it to a proof-of-stake protocol.
It’s been a complicated journey. There have already been several forks to prime the chains for alignment. Even then, the merge itself is by no means the end of the story. Post-merge, Ethereum will need to address some issues.
This post looks at what will happen after the Ethereum merge, and how you can earn rewards.
Ethereum is Gearing up for a Switch to Proof-of-Stake
Over the last year or so, Ethereum has been gearing up for a switch to proof-of-stake. To enable this, they created a new proof-of-stake blockchain to exist alongside their main proof-of-work chain. When the proof-of-stake chain was launched, the protocol was quite different to the proof-of-work chain. Over time Ethereum has forked both chains, with each fork bringing the two closer together. This will eventually culminate in a merge
The Merge is Not the End of The Story
The Ethereum merge will bring the chains together, but it won’t be the final stage. To save time and effort, Ethereum will cut a few corners. The merge will be lightweight, focussing on must-haves. It will leave out the should, could and would-haves.
The biggest missing piece is the ability to make withdrawals. Right now, you can’t move Ether out of your ETH2 proof-of-stake account. This is reasonable for now. Despite having real economic value invested on the line, ETH2 is currently still a test chain.
However, post-merge the ETH2 chain will become the main execution layer. And yet you still won’t be able to withdraw.
What Will Happen After the Ethereum Merge?
As a first step, a clean-up fork is planned shortly after the hard fork. This importantly will enable withdrawals. It will also remove a lot of redundant code. Mostly functionality that enabled communication between the proof-of-stake and proof-of-work chains.
There’s a further pipeline of planned upgrades for the merged chain. These post-merge activities are covered in the video below and include:
- Enhanced security
- Execution layer improvements
- Possible address length increase. From 20-32 bytes
- Introduction of stateless clients
Vitalik: What Happens After ETH1 and ETH2 Merge?
How You Can Benefit from the Ethereum Merge
The Ethereum merge gives you a chance to earn more Ether. Specifically, you can start to earn staking rewards.
Staking lets you earn Ether without any effort. You just need to allocate your Ether to a trusted validator. You can find out more about staking here.
In a nutshell though, just holding Ether will be enough to start earning rewards. Provided you choose the right validator. We can help.
Why Choose Blockdaemon as your Validator?
Blockdaemon is the leading blockchain infrastructure provider. We are already invested in the ETH2 blockchain. We already run high-yield validators on many other blockchains. We are perfectly positioned for the post-merge world. We have the dedicated infrastructure and expertise.
If you want to benefit from the Ethereum merge, get in touch with Blockdaemon today. We will make your ether work for you. We’ll turn your passive investment into an active asset.
Be sure to check out our Top 3 Opportunities for Financial Institutions today.