When Ethereum launched in 2015, it followed in the footsteps of many other crypto, using a consensus mechanism known as proof-of-work (PoW). Now Ethereum is on track to replace that system with a more energy-efficient process known as proof-of-stake (PoS), in an epic shift in the Ethereum platform now called the Merge.
The chief difference between these two consensus algorithms — proof of work vs. proof of stake — is how much energy they consume. The belief is that moving to a proof-of-stake model will cut Ethereum’s energy needs by over 99%.
Currently, the Ethereum Merge (formerly called Ethereum 2.0) is scheduled to launch around Sept. 15 or 16, 2022, though that date may change. For most end users, there is nothing that needs to be done — the Merge will happen behind the scenes. Here’s what else you need to know.
What Will Happen During the Merge?
On August 10, Ethereum completed the final preparatory and testing steps necessary before doing the Ethereum Merge. During the Merge, the Ethereum network will migrate from the current main branch with a new consensus model also known as the Beacon chain. This process is intended to be seamless to the end user.
Why Is The Merge Happening?
When Bitcoin was first proposed and introduced back in 2009, it validated new coins using a proof-of-work system. With PoW, cryptocurrency miners use complicated mathematical computations to validate transactions on the blockchain. PoW has been widely criticized for its excessive energy use.
The Ethereum Merge is happening to move the project to a more energy-efficient “proof of stake” (PoS) model for validation. With PoS, the people that validate the blockchain are the current network participants. To participate in the validation, participants stake some of their own coins to attest that they believe a given block to be valid.
One estimate that’s widely quoted is that moving to a proof-of-stake model could cut Ethereum’s energy use by over 99%.
What Is and Isn’t Changing?
The big thing that is changing with the Ethereum Merge is migrating from the current proof-of-work model to a proof-of-stake model. This will be the end of traditional crypto mining as a way to generate new Ethereum tokens.
Otherwise, nothing will change for most end investors and non-node operating stakers. If you hold Ethereum or ETH tokens, there is no need to do anything to prepare for the Merge.
How Will the Merge Affect Current ETH Holders?
The Ethereum Merge is intended to take place with no downtime to current customers. So if you are a current ETH holder, there is no need to do anything.
In fact, you should be aware of and on the lookout for scams. If anyone approaches you saying that you need to convert your ETH into ETH2 tokens or do anything else because of the upcoming merge, it is likely a scam.
Will the Price of Ethereum Go Up After the Merge?
The Ethereum merge is not intended to significantly impact the price of Ethereum or ETH tokens. As with most investments, the price might go up or might go down, and past performance is no guarantee of future results.
📈 Live Look: Current ETH Price
What Happens to ETH?
The developers and admins of Ethereum have stated that there should not be any impact to end users, including their ETH tokens. There will not be a separate ETH2 token — instead, Ethereum 2.0 refers to the overall process of upgrading, merging and improving the overall ecosystem.
If anybody reaches out to you to get you to convert your ETH tokens into an ETH2 token, there is no need to do so (and the offer could be a scam). As of this writing, there is no need for ETH holders to convert their tokens.
How Will SoFi ETH Holders Be Impacted?
If you are currently holding ETH tokens with SoFi, there is no need to do anything to prepare for the merge. Your tokens will remain in your account as the Ethereum merge takes place and available once the merge is completed. While the merge is intended to take place with zero downtime, it is possible that there may be a small period of time during the merge when you are unable to trade ETH.
Up to $100 in bitcoin2 – just for you.
With 30 coins available, our app offers a secure way to trade crypto 24/7.
The Takeaway
Ethereum and its native token ether (ETH) have been growing steadily since the platform launched in 2015. The Ethereum platform is scheduled to shift from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism around Sept. 15 or 16, 2022.
This transaction is intended to be seamless to the end user, so there is no need to do anything special with your account or wallet.
Otherwise, it’s likely the cryptoverse will continue as usual. And if you’re ready to start trading, this is a great time to open an online brokerage account with SoFi Invest. If you want to trade Ethereum or other types of crypto, you can get started with as little as $10 and you can trade dozens of crypto 24/7, from SoFi’s secure platform.
Photo credit: iStock/Alexander Gavrilov
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.
First Trade Amount
Bonus Payout
Low
High
$50
$99.99
$10
$100
$499.99
$15
$500
$4,999.99
$50
$5,000+
$100
SOIN0822006
