You may have heard that the world’s most widely used blockchain is nearing a massive upgrade that will change its infrastructure and make it more energy efficient – but there are some misinterpretations circulating among the crypto space that investors should be aware of.
In a long-awaited upgrade called “merge,” Ethereum plans to switch from a proof-of-work (POW) model to a proof-of-stake (POS) model.
The goal of the merger is to make Ethereum more scalable, secure and sustainable.
Ultimately, if it happens as planned, cryptocurrency mining will become obsolete, which would significantly reduce Ethereum’s environmental impact and likely reduce its supply, because fewer coins are expected to be created.
The security of the blockchain against potential attack is supposed to improve and institutional investment in the Ethereum network is expected to increase.
However, there are other misinterpretations surrounding the merger that are incorrect. It may be difficult to determine what is true and what is not.
Here are three common misinterpretations .
The merger will create a “new” Ethereum cryptocurrency
A big misinterpretation is that Ethereum will have a “new” currency after the merger. This is incorrect, Ethereum developer Tim Beiko told Fortune. Ethereum’s cryptocurrency, Ether (ETH), will remain the same.
Previously, the merger was referred to as “Ethereum 2.0” or “Eth2”. But in January, the Ethereum Foundation and the blockchain’s key developers announced that this labeling would be phased out as many scammers tried to convince users that there would be a new cryptocurrency “Eth2” separate from ETH, which is false.
The merger will reduce transaction fees
Another misconception is that the merger will reduce Ethereum’s transaction fees. This is also incorrect, Beiko said.
The merger will only shift Ethereum from a working proof model to a stake proof model.
Ethereum is currently based on a proof-of-work model, in which miners must complete complex ”puzzles” to validate transactions and create new coins. This process requires a huge amount of computing power and is often criticized for its environmental impact.
With the planned upgrade, Ethereum is transitioning to stake proofing, which will allow users to validate transactions based on the number of coins they contribute.
There is a set date for when the merger will take place
Despite various speculations, there is still no official timeline for the merger, Beiko said.
Some predict it may happen this summer, but it’s important to only believe the Ethereum Foundation’s statements about the confirmed time. As Beiko says, “it is possible that scams and false announcements will arise in the coming months.”
The unknown timeline is due to how much preparation is required to make the merger happen. Ultimately, the success of the merger is a big deal because there are many stakes – including a large amount of money – riding on Ethereum.