Ethereum 2.0 FAQ
If you are looking for information about The Merge we've got you covered. Below you can find answers to the most common questions about the upcoming Ethereum upgrade.
What is Ethereum 2.0?
Ethereum 2.0 (ETH2) is a set of upgrades that looks to make Ethereum more scalable, secure and sustainable.
Will Ethereum be renamed after The Merge?
No, Ethereum will still be Ethereum and no new cryptocurrencies will be created. The ticker for the Ethereum token will remain the same, ETH.
This misconception comes from the fact that for a time ETH on the mainnet was referred to as ETH1 and ETH on the Beacon Chain was referred to as ETH2. After The Merge however only ETH will exist.
What are the major differences between current Ethereum and Ethereum 2.0?
There are two big changes happening with the introduction of ETH2.
The first one will be a shift from Proof of work (PoW) to Proof of Stake (PoS). The second one will be the introduction of shard chains.
What is the difference between Proof of Work (PoW) and Proof of Stake (PoS)?
PoW is a consensus mechanism that relies on computational power and the expenditure of energy to validate transactions on a blockchain. In PoS validators use capital to validate transactions. This not only helps alleviate environmental concerns associated with PoW but also improves security and scalability.
When will ETH2 launch?
The ETH2 launch will be segmented into phases.
The first phase occurred in December 2020 with the launch of the Beacon Chain. The launch of the Beacon Chain marked an important milestone in the road to ETH2, introducing PoS to Ethereum.
The next phase is called The Merge and it is scheduled to happen on September 19, 2022. The Merge represents the fusion of the current Ethereum mainnet with the Beacon Chain. This update will replace the current Proof of Work consensus mechanism with Proof of Stake.
Shard chains are a scalability mechanism through which the blockchain is divided among many different nodes thus allowing transactions to be processed in parallel instead of consecutively. This helps drastically improve the network amount of transactions per second. This upgrade is currently expected to launch somewhere in 2023 following The Merge. There has been no confirmed date yet but be on the lookout for announcements.
What will happen to my Ethereum?
You won’t need to do anything with your Ethereum. The Merge was set up to be a seamless transition for the average user.
What is Ethereum expected staking APR after The Merge?
The current APR before The Merge is around 4%. After The Merge the best estimates place the APR between the range of 7-11%.
You can find a more comprehensive answer to this question here.
Will there be a Proof-of-Work fork of Ethereum after The merge? Can I get tokens on the new chain if I stake them?
Yes, there most likely will be a fork of Ethereum after The Merge. Staked Ethereum will probably also not be counted towards getting new tokens in the forked chain.
There are pros in choosing to stake early rather than wait for the fork. As more ETH gets staked the less rewards are available for each validator. Due to the expected increase in staking APR post-merge one can capture this yield by staking early.
By waiting to stake one can also risk being caught up in the staking queue that can form if a large number of validators are trying to be created at the same time. This can push the current waiting period to start earning rewards, which currently goes up to 7 days, to a 2 to 4 months waiting period.
The calculation being made here is between the profit earned from the tokens on the new chain versus the loss of staking rewards for 2 to 4 months.
What is the minimum amount of ETH I can stake?
You don’t need any Ethereum to run a node. However to validate blocks and earn staking rewards you need to stake at least 32 ETH.
Running a non-block-producing node is still incentivized since it improves network security.
How often are staking rewards distributed?
Withdrawals from the Beacon Chain are not enabled so rewards are not being distributed just yet. You can still earn rewards however.
Will I be able to earn MEV rewards from staking?
Yes, our APR estimates include MEV rewards.
Is there a slashing risk for Validators?
Yes, there is slashing risk to prevent malicious actions on the network.
Do staking rewards compound?
No, staking rewards do not compound because withdrawals from the Beacon Chain will not be enabled just yet.
Will the network experience any downtime during The Merge?
No, the network will not experience any downtime. The upgrade was designed to cause no disruption to the network.
Will the gas fees reduce after The Merge?
No, The Merge changes the consensus mechanism from PoW to PoS. Gas fees are dictated by the network usage, future updates will look to address gas fees.
Will transactions be faster after The Merge?
It’s very unlikely. The Merge focus is not on scalability, future upgrades to the network will focus on scalability.
If you are interested in staking Ethereum with P2P, please email us at letsgo@p2p.org.
About P2P Validator
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