Thread by @PolygonDaily

🤔 Everyone is talking about The Merge and praying for it to succeed, so what is Ethereum The Merge?

The thread below will help you understand what it is, the impacts and risks of #TheMerge
🧵 👇

1/ What is The Merge?

The main purpose of the Merge is to transition Ethereum from its current proof-of-work consensus mechanism to the proof-of-stake model.

Simply put, a miner becomes a holder and staker

2/ Why need The Merge?

Start with Ethereum's Problems
👉 Consumes too many resources: PoW ⚡
👉 Low scalability, High cost, Congested

POS can help Ethereum reach ~100K TPS

3/ Beacon Chain - The Merge's First Step

A separate parallel PoS chain could be tested in production without directly impacting the already existing PoW network that secures hundreds of billions of dollars of economic activity.

420K+ Validators
13M+ Ethereum Actively Staking

4/ The Merge Goal

Greener: Reducing the power consumption to secure Ethereum by around 99.95%.
Scalability: increase throughput
Decentralization: More validators
Security: Sharding (2023)

5/ Impact of The Merge on Ethereum
 
Selling pressure ⬇️:
❌ Miner
❌ Pay Electricity
 
Staking ETH reward estimated at 9 - 12% APR
Before The Merge: APR = base APR
After The Merge: APR = base APR + tip fee
 
Take a look at sheet below for more information
docs.google.com/spreadsheets/d…

Deflation

Before The Merge
Ethereum mainnet issues ~ 13500 ETH per day ➕ Beacon Chain issues ~1700 ETH per day ➖ Burn base fee (EIP 1559)

After The Merge
Ethereum POS ~ 1700 ETH per day ➖ ETH burned 🔥

Estimated deflation 1.5 - 3%

6/ Impact of The Merge on Alt L1 & L2

The Merge is just the first step of the Ethereum Update, so it won't affect alternate L1s or "ETH killers" much

In Long term, when ETH's gas fees decrease and TPS increases, it will be difficult for L1 to attract users and market share

L2s will continue to support Ethereum network expansion toward mass adoption

7/ Popular Myths Around The Merge

❌ Create a New Token
❌ Gas Fees Decrease
❌ Transactions Become Faster
❌ Need 32 ETH to run a node 👉 You can stake via centralized services or liquid staking pools

❌ Unlock 13M+ ETH Staked
✅ Staked ETH will stay locked up until 6-12 months after the Merge.

8/ What will come after The Merge?

The Surge (2023): The introduction of Sharding on Ethereum.
The Verge: Introduces verkle trees, reduces node size
The Purge: Reduces the hard drive space needed for validators
The Splurge: Final update aims for 100k TPS

9/ The Merger's Risks

Ethereum is getting more complicated because there are so many changes (1559, The Merge, sharding, verkle, ...)

If The Merge fails, DeFi Ecosystem will be severely affected

Replay Attacks
Thread below will show you how to get safe

10/ Conclusion

The Merge is an essential event for the Crypto market, especially for Polygon as an L2 with Rollup technologies.

The following thread will show the effects of The Merge on Polygon

Let me know what you think about The Merge