Four potential risks of the Ethereum merger identified by Coinbase

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Last Updated on September 13, 2022 by Bitfinsider

With the Merge on September 15, Ethereum will go from proof-of-work (PoW) to proof-of-stake (PoS). In anticipation of the most anticipated upgrade in cryptocurrency history, Coinbase has now identified four dangers related to the Ethereum Merge.

The Beacon Chain and Ethereum Mainnet will be merged on September 15 as a result of the efforts of Ethereum developers and users. The Merge process is currently 99.76% finished.

However, Coinbase Cloud has listed several possible dangers associated with the Merge. These include risks related to technology, operations, finances, and client diversity.

The 4 Big Risks Associated with the Merge as Outlined by Coinbase Cloud

Economic Risk: Miners will become obsolete as a result of the PoS transition since validators will be in charge of creating blocks. Additionally, GPUs are employed by Ethereum miners, not Bitcoin miners. So, miners might have to migrate to other mining tokens that are now in use. With dApp, DeFi platforms, and other systems, the Ethereum PoW fork might result in some serious problems.

Operational Risk: Following the Bellatrix hard fork, validators’ and node operators’ participation decreased because some did not upgrade their clients. Numerous activities, such as testnets, last-minute client releases, and client releases, are ongoing in the background. The Sepolia upgrade caused between 25–30% of validators to go offline owing to configuration difficulties, according to recent development announcements. Only 85% of nodes have updated to the most recent client updates, even though The Merge has already occurred.

Technical Risk: The likelihood of bugs and technical difficulties is increased because the Merge is the most anticipated and technically challenging upgrade in cryptocurrency to date. Furthermore, it includes the joining of two blockchains, the consensus layer Beacon Chain (PoS) and the execution layer Ethereum Mainnet (PoW), which is entirely distinct from a hard fork.

(Lack of) Client Diversity Risk: Lack of customer diversity raises the possibility of a consensus client taking control of the market. Clients have the option to go against consensus and offer block validation on their own criteria. Prysm currently holds about 44% of the company, compared to Lighthouse’s 34%.

Ethereum Price at the Time of Writing

The EIP-1559 burning mechanism will cause the ETH price to deflate as a result of Ethereum’s switch to PoS. The price of Ethereum is currently trading above the critical $1500 mark. Any risk, though, might push the price below the level. The price of ETH is $1,625 at the time of writing.

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