Coinbase Announces Precautions Ahead of Ethereum Merger

Coinbase has announced that it will pause ETH and other ERC-20 token transactions during the upcoming Ethereum merger.

The exchange is doing this as a precaution to ensure that their systems correctly reflect all the changes introduced by the merger. The company will inform the public through its social media channels when it will resume ETH and ERC-20 deposits and withdrawals.

In the upcoming Ethereum merger, the Ethereum blockchain will migrate from the energy-intensive proof-of-work consensus mechanism to the proof-of-stake consensus mechanism. The execution layer (Ethereum Virtual Machine) will be merged with the beacon chain, a new consensus layer, in a move that should have minimal effect on end users.

The merger is designed to reduce Ethereum’s energy footprint, enable greater decentralization through the use of validators in proof-of-stake instead of miners in proof-of-work, and pave the way for improved scalability through a process that is called ‘sharding’. No new Ethereum token will be issued after the merge.

The Ethereum development team recently completed a merger of the Beacon chain, the new Ethereum consensus layer, with the Goerli testnet execution layer and is expected to merge the beacon chain with the Ethereum mainnet around mid-September. 2022. To minimize risk, many exchanges choose to pause ETH-related trades. Coinbase is one of them.

Exchange clarifies implications for different users

The exchange says that all funds are safe during the merging process and that users do not need to take any action. Post-merge staked ETH appears as an ETH(ETH2) balance in a user’s Ethereum wallet, separate from the unspent ETH balance. Coinbase has created a ticker ETH2 to represent staked ETH, which will be removed after the merge as it does not represent a new ETH token. Likewise, the exchange is warning users not to be misled by anyone claiming that ETH can be “upgraded” to ETH2.

To become a validator on the new ETH network, a minimum of 32 ETH must be locked or “staked”. Validators are discouraged from approving invalid or unfair trades through slashing, where they lose a portion of their ETH wagered if they choose to trade unfairly.

If less than 1 million ETH is wagered, strikers can earn up to 18% annual percentage yield or interest. If more than 100 million ETH has been wagered, annual returns of 1.81% or less are possible. Withdrawals from staked ETH are not expected until 2023.

With regard to institutional investors’ withdrawals and deposits of ETH and ERC-20, Coinbase advises that these be made before the merger.

Customers using Coinbase Cloud can expect a routine upgrade process, with downtime of approximately 10 minutes.

Coinbase Wallet users who hold non-replaceable tokens, ETH, ERC-20 tokens, or DeFi positions are unlikely to experience significant disruptions. They can continue to trade on Ethereum once the merger is complete.

Binance, Tether, Circle Support Merge

Binance said it supports the merger and is carefully looking for new tokens from proof-of-work Ethereum forks, of which there are reports. The exchange noted that tokens from these forks will be subject to a rigorous review process. It has not made any official announcements regarding the hiatus of ETH and ERC-20 tokens.

Bybit, another exchange, has stated that it will airdrop, deposit and withdraw hard fork tokens approved by its risk management and security teams.

Stablecoin giants Tether and Circle expressed support for the merger. According to Circle, USDC is the largest US dollar-backed stablecoin on Ethereum.

for Be[In]Crypto’s Latest Bitcoin (BTC) Analysis, click here.

Disclaimer

All information on our website is published in good faith and for general information purposes only. Any action the reader takes based on the information on our website is strictly at their own risk.

Leave a Reply

Your email address will not be published.

close