what changes for ether holders from this Thursday

The Ethereum transition will take place this Thursday around 7:00 a.m. French time. What will happen to users? BFM Crypto takes stock.

One of the most anticipated events of the year will take place this Thursday around 7:00 am French time, it is the transition of Ethereum called “The Merge” at block 58,750,000,000,000,000,000,000. And a question arises: what will change for the users of the blockchain or the holders of ethers, the cryptocurrency of this blockchain?

Taking the prism of the user experience on Ethereum is fundamental. While the Bitcoin blockchain allows value exchanges with the queen of cryptocurrencies (bitcoin), Ethereum has seen the development of many related applications. We can think of those using smart contracts that allow traditional finance operations (loans, borrowing, etc.) to be carried out without any control body, in what is called decentralized finance (DeFi). We can also mention NFTs (non-fungible tokens), which are mainly issued on this blockchain.

Changes during 2023

As a reminder, this Thursday, Ethereum will switch from “proof of work” to “proof of stake” operation, therefore changing engine but without significant change (at least in the short term) for the user. Indeed, if we change the engine of a car, it will be able to continue driving thanks to a new engine, without the driver even changing his driving habits.

Until now, most observers believed that The Merge would reduce gas fees, those fees to make a transaction on Ethereum, which are around $3 per transaction so far. In May 2022, the blockchain even experienced a historic peak in fees to be paid, with an average of $200 to complete a transaction. It is in particular because of the high fees that some users have turned to blockchains with reduced fees, such as Polygon or Solana.

The fees remain lower to carry out a transaction on the Bitcoin blockchain, around 1 dollar per transaction to date. This reduction in gas fees on Ethereum should take place in a second time, rather for 2023 or later, during the next stage of The Merge, called “The Surge”. Similarly, the objective for Ethereum will then be to go from 20 to 100,000 transactions per second, as Vitalik Buterin wishes. But in the immediate future, the number of transactions per second will not really change.

Towards hard forks?

For those who hold ether, there are certain points on which it will be necessary to remain vigilant on tomorrow. Indeed, in anticipation of The Merge, centralized platforms such as Coinbase, Kraken or even Binance have decided to block their users’ ether withdrawals and deposits by preparing for a possible hard fork. In a statement, Binance said it made the decision to “reduce trading risks associated with price volatility and to maintain the safety of user funds during the hard fork.”

As a reminder, a hard fork consists of the separation of a blockchain into two distinct chains, following a division within the developers or the community themselves on a fundamental subject relating to the protocol of this blockchain. In fact, some players today do not want to go on the “proof of stake” of Ethereum and want to stay on the “proof of work”, putting forward the idea of ​​alternative blockchains which will use the history of the old Ethereum blockchain.

Thus, if after The Merge there are hard forks, the centralized platforms will be able to choose whether they support them or not and return forked tokens to their users. Concretely, for a user, if he had 1 ether on a platform, he could receive another ether from this same hard fork.

As a reminder, to date, almost two thirds of ethers (63%) are “staked” (i.e. deposited) via a few centralized platforms (according to calculations by the crypto data analysis platform Nansen), in particular the Lido protocol which concentrates 32% of the ethers, Kraken (8.5%), Coinbase (7.2%) or Binance (6.7%). Some observers speak of potential governance issues after The Merge.

The risks of scams with The Merge

Similarly, in the event of a hard fork of the blockchain, users will have to be vigilant to the risk of scams. For example, it will be necessary to be vigilant against the “false” extensions of certain digital wallets which will allow access to a blockchain resulting from a fork.

“It will be presented to you as the only extension compatible with the hard fork X and it will simply be enough to import your wallet to use it”, underlines the media Au Coin du Bloc. In fact, it will be a fake platform that steals all funds from users.

Similarly, there is the well-known phenomenon of airdrops, which generally consists of a blockchain or cryptocurrency project giving away tokens to make itself known. Fake projects might offer users to give them funds, but will actually be traps to steal cryptocurrencies.

“Nevertheless, it is possible that certain decentralized exchange platforms or crypto bridges allow you to claim tokens. You will still have to wait for announcements on official media before carrying out any operation”, specifies the article.

Likewise, for users, it will be a question of being careful when buying an NFT in the morning, to avoid any risk of scam when switching to the new blockchain.

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