With the Ethereum merge expected to happen on September 15, it’s understandable the entire crypto industry is talking about it. ETH is the second largest cryptocurrency by market cap, and the transition from being a proof of work (POW) blockchain to one that solely uses proof of stake (POS) has been a long time coming dating all the way back to before the network launched in 2015.
But there’s also another big development that’s expected to happen just one day before “the merge”. That’s the Avalanche integration on the eCash network. Considering eCash is still just outside the top 50 by market cap, there’s been much less discussion regarding this particular event. Still, the Avalanche integration on eCash is an important milestone and anyone who truly believes in decentralized cryptocurrencies should take note.
Let’s begin by laying out what these two events actually entail. As stated above, the ETH merge is primarily a transition from one consensus mechanism to another. By discarding POW in favor of POS, the ETH network will become much more energy efficient and environmentally friendly while presumably increasing the overall security of the network. The increased security is due to the sheer amount of stake that would be needed by a hostile actor to take over the network and create havoc. Meanwhile, critics of the ETH merge point out that while POW has proven itself over the past decade as a fully trustless and permissionless consensus mechanism, POS is not nearly as battle tested. Known vulnerabilities such as the nothing at stake problem and the contention that POS is self-referential are a couple of the concerns being raised.
Moving onto the eCash + Avalanche integration, this is also a major upgrade that has been in the works for years. First as part of the Bitcoin Cash roadmap, then as a part of the eCash roadmap after the latter underwent a chain split from BCH back in November 2020. Unlike the merge, the integration isn’t so much a transition from one consensus mechanism to another as it is in addition to. When the Avalanche whitepaper was released in 2018, Amaury Séchet, the founder of both Bitcoin Cash and eCash, realized this was exactly what he was looking for to solve some of the scalability and usability problems facing any Bitcoin like network. After years of grueling technical work, the eCash team is finally ready to roll out the first phase of Avalanche known as post-consensus on September 14. By layering Avalanche on top of Nakamoto consensus, this will increase security to the eCash network by making it resistant to 51% attacks, and all transactions will be made irreversible after a single block confirmation. This means exchanges can credit eCash users with their deposited XEC after 1 block rather than waiting the usual 6-12 blocks cryptocurrency traders have grown accustomed to when dealing with deposits for Bitcoin and its forks.
Something else I must mention regarding the ETH merge is the fact that the block reward is going to be reduced by ~90% after the transition to POS is completed. This is what’s behind the so-called “triple-halvening” narrative, which may be the reason behind the recent jump in the ETH/BTC ratio as speculators pile more capital into ETH hoping for higher prices due to the significantly reduced issuance after the merge.
On the other hand, the Avalanche integration for eCash will have no impact on XEC issuance. While there will be a POS component once the integration is completed, the amount, if any, of staking rewards is still under consideration.
It’s important to keep in mind that in both cases, these are but single steps on the way to the final goal. For ETH, the merge is to be followed by the surge, the verge, the purge, and the splurge. You can find more information regarding each of those steps here.
As for eCash, the Avalanche post-consensus integration will be followed by the activation of Avalanche pre-consensus, which will bring instant transaction finality to the network. Once pre-consensus goes live, exchanges will theoretically be able to credit XEC depositors instantly and make the need to wait for block confirmations a thing of the past. This will also pave the way for many other enhancements you can learn about here.
One final thing I wanted to add was how differently staking works between ETH and XEC. For ETH, you need a minimum of 32 ETH (~$51,000) to run your own staking node. For XEC, the minimum requirement is 100M XEC (~$4,100) to run an Avalanche node. Another key difference is that your ETH must be locked in a staking contract address. This is because nodes that misbehave or don’t follow the rules can be “slashed” and the staked ETH can be taken away from the node operator. This is not the case for those running an eCash Avalanche node. You simply provide a proof of your staked XEC but you and you alone maintain control of your private keys. There is no slashing mechanism so your funds are never at risk.
I wish both projects the best of luck as they undergo these monumental upgrades over the coming days. I’m excited to see real technical progress being made and hope this is just the beginning as cryptocurrencies with actual utility lead the charge in delivering more economic freedom to the world.