The Ethereum merge & possible tax implications explained Insights UHY Hacker Young

Ethereum Hard Fork

Not least, reducing Ethereum’s electricity consumption by an estimated 10,000 per cent, and going a long way to assuage the environmental criticisms levelled at the crypto industry. This was the original way blockchains were created, with the world’s biggest cryptocurrency, Bitcoin, being mined in this way. However, this method of crypto mining has come under heavy scrutiny for a variety of reasons, with economical concerns being one of the top causes for criticism. Previously, the Ethereum blockchain had a proof of work consensus that required miners to spend energy to use their computing hardware to solve a puzzle with the objective of avoiding sybil attacks. As of 2 September 2022, the value of ETH was priced at approximately $1,590.85 with a total market capitalisation of $194,413,024,351 (CoinMarketCap 2022).

Does ETH 2.0 hurt a polygon?

The already existing partnerships and successful products are one reason why Polygon should not become obsolete with the introduction of Ethereum 2.0. Apart from that, according to the current knowledge, Ethereum will not be able to reach Polygon's top speeds and prices even after the update.

“Although this is a positive move in the right direction it still doesn’t solve the gas fee problems we saw in the last upward market. I do hope it is solved before the market picks up as it become a real issue. “It drastically reduces energy consumption on the ETH network this will be a key driver in the future for certain projects as factor to build on Ethereum. “This is a really positive move in the right direction as we personally wouldn’t have used Ethereum as our main NFT platform network otherwise. “The slashing of energy consumption will be the main reason as it will become significantly more appealing to institutional investors, who bring with them enormous capital, expertise and reputational pull. “Other chains will quickly converge with this benchmark rate, which will be significantly higher than the current risk-free rate in the bond markets. It will be the base source of fixed yield for DeFi bonds and DeFi interest rate derivatives.

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Only when one fork of the blockchain becomes sufficiently long do the network users confirm the original block. Hence, these types of blockchain forks typically expire relatively quickly. Ethereum’s protocol—the EtHash specifically—was developed with the direct intent of trying to limit the power of ASIC mining hardware and ensure that general-purpose computers would retain a mining advantage1. In April 2018, Bitmain announced that it had successfully developed an ASIC mining chip capable of processing Ethereum transactions 2. Bitmain’s release specifications state that its Antminer E3 chip is capable of mining 180 MH/s, roughly 4–6 times more hashes than common GPU-based mining setups. While the Antminer chip requires roughly the same energy consumption as typical GPU-based setups , its speed allows it to more efficiently mine blocks of Ethereum than standard, GPU-based setups3.

Although the merge has had a bumpy rollout, extensive testing on public sandboxes and bug bounties helped ensure a safe transition to proof-of-stake. This is an adjustment in the algorithm of the new coin, which makes Ethereum Hard Fork a replay attack impossible. According to Bitfinex, customers would have to put together CSTs by hiring the Token Manager. After the CST is created, Ethereum will be debited automatically from the customer’s account.

What is the Ethereum Merge Update?

Ethereum co-founder Vitalik Buterin dismissed fork rumours and claims, adding that neither the foundation nor the community has any plans of forking the Ethereum blockchain. Per a CoinTelegraph report, Shane Molidor, CEO of AscendEx later shared that the Ethereum community is showing considerable interest in the hard fork notion, which may be a good head start to consider forking Ethereum in the long run. The faction believes that the merge can have a prolonged consequential impact on the entire Ethereum ecosystem, which will eventually end up ousting miners by introducing the Ethereum staking mechanism.

Ethereum Hard Fork

“The Ethereum merge is a massive milestone for the entire crypto and blockchain industry. We’ve never seen a major upgrade like this in the whole lifespan of Ethereum. Swapping PoW for PoS – where the real-world value invested comes from ETH staked directly in a smart contract – would remove the need for miners to burn energy to add a block into the blockchain. According to Forex Suggest, Ethereum used the second most energy for each transaction in 2021, consuming 62.56 kWh, which produced 93.84 lbs of CO2. Despite being far more efficient than Bitcoin, this was still a very high energy cost that produced a worrying amount of CO2. Data shows that daily trading volume dropped 66% to $4 million from $13 million after the first trading week.

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Ethereum today took the first steps in implementing “The Merge” with the Bellatrix hard fork, set for the 6th of September. The biggest cryptocurrencies tumbled around 80 per cent from their late 2017/early 2018 peaks. Over the following twelve months, the crypto market was battered by high-profile thefts from exchanges, the threat of regulation, and the lack of progress made in entering mainstream markets.