The Merge is coming soon
The long anticipated Ethereum upgrade, dubbed “The Merge”, where Ethereum transitions from a Proof-of-Work (PoW) to Proof-of-Stake (PoS) consensus mechanism, is happening soon. Ethereum developers are working towards a soft deadline of September 19th, 2022, so we can expect it sometime in Q3 or Q4 this year.
In short, the Ethereum network (the execution layer) will be “merging” with the Beacon Chain (the consensus layer using PoS). Once completed, Ethereum’s PoW consensus mechanism will be permanently replaced by PoS. Many consider this to be the blockchain’s biggest technical upgrade since its inception and is set to provide significant benefits, including a 99.95% reduction in energy consumption, enhanced deflationary effects plus better network efficiency, security and scalability.
Sygnum’s Chief Clients Officer Martin Burgherr is bullish on The Merge and refers to it as “a road that will soon turn into a superhighway with more traffic, but lower tolls”. You can read his opinion article on the ETH merge here.
Potential ETH miner-led fork post-merge
ETH is currently the largest mineable altcoin with an industry estimated to be worth USD 19 billion. In the post-merge PoS Ethereum blockchain, ETH miners will no longer be able to generate mining rewards – and they cannot easily change their specialist hardware to mine other PoW coins. As a result, a miner-led community movement to “fork” the ETH chain has emerged that proposes to fork ETH into ETHW (short for ETH PoW) and ETHS (short for ETH PoS), ultimately enabling the continuation of ETH mining activities post-merge in parallel. It is still uncertain how this situation will develop, as details like the fork or snapshot timing have not yet been announced.
Sygnum’s stance on any Ethereum post-merge forks
Sygnum will support the wishes of the majority of the Ethereum community in its transition to a PoS blockchain. We look forward to leveraging the benefits of the upgraded Ethereum network within a regulated environment for our clients.
However, we will also continue to monitor any potential ETH forks closely. If one does materialise, Sygnum will evaluate fully and will consider supporting the forked chain if it receives broad support and the value of its token is substantial. Note that we have supported forks before, for example XRP’s Flare fork.
If Sygnum does support an ETH fork, our clients will be kept up to date and our team will manage all essential activities on their behalf, for example automatically crediting their accounts with the fork’s token.
Learn more about digital asset banking at Sygnum here.
Sygnum is the world’s first digital asset bank, and a digital asset specialist with global reach. With Sygnum Bank AG’s Swiss banking licence, as well as Sygnum Pte Ltd’s capital markets services (CMS) licence in Singapore, Sygnum empowers institutional and private qualified investors, corporates, banks, and other financial institutions to invest in the digital asset economy with complete trust. Sygnum operates an independently controlled, scalable, and future-proof regulated banking platform. Our interdisciplinary team of banking, investment, and Distributed Ledger Technology (DLT) experts is shaping the development of a trusted digital asset ecosystem. The company is founded on Swiss and Singapore heritage and operates globally. To learn more about Sygnum, please visit www.sygnum.com.
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