BitGo’s Approach to the Ethereum Merge

The long-awaited Ethereum Merge is slated for September 15th or 16th. The community has been readying itself for years in anticipation of this transition from a Proof of Work (PoW) consensus mechanism to the Proof of Stake (PoS) model. As a BitGo client you do not need to do anything, your digital assets are secure.

What does the Merge entail, how does it affect the Ethereum network and your Ethereum holdings, and what is BitGo doing behind the scenes to ready itself and its clients for the change?

Let’s dive in.

What is the Merge?

The Merge represents the official transition to using the Beacon Chain as the engine of block production.

After the Merge, the Proof of Stake validators will assume the role and will be responsible for processing the validity of all transactions and proposing blocks, replacing the current consensus mechanism that uses mining to produce valid blocks (Proof of Work). No history is lost in this process — as the Mainnet merges with the Beacon Chain, it will also bring the entire transactional history of Ethereum with it.

The Merge will take place through two hard-forks:

• The first is the Bellatrix Upgrade, which will kick off the Merge by upgrading the Consensus Layer to prepare the Beacon Chain — which has been live since December 2020 — for the Merge to mainnet
• The second is the Mainnet Merge called “Paris”, which will take place approximately 10 days after Bellatrix — Paris is activated on the first PoS block, and deploys two EIPs (EIP-3675 for PoS consensus, and EIP-4399 for supplanting DIFFICULTY opcode with PREVRANDAO)

What is the difference between Proof of Work and Proof of Stake?

Proof of Work assets, such as Bitcoin, reach consensus and validate transactions by dedicating computer power to solve mathematical puzzles and are then rewarded with Bitcoin. Alternatively, in a Proof of Stake model, network participants commit or ‘stake’ some of their holdings to a validator node which ensures the accuracy and validity of transactions. Stakers then receive a portion of the fees for locking in their holdings and actively participating in securing the network.

What are the benefits?

First and foremost, there will be a sea change in the monetary policy of Ethereum as it shifts from inflationary into a mostly deflationary asset. Ethereum will become an increasingly scarce asset as issuance decreases.

Simultaneously, the change will allow more users to participate in the Ethereum network and earn rewards by staking their Ethereum. The Merge is also viewed by many as a net positive because proof of stake is less energy-intensive than proof of work and will lower Ethereum’s impact on the environment. Proponents point out that utilizing proof of stake will also help make Ethereum more secure, as users will participate in validating transactions and make Ethereum more decentralized.

What are the technical details?

With the successful Goerli Merge completed on August 10, 2022, Ethereum core developers reached consensus to aim for a mainnet activation of the Merge around September 15th-16th, 2022. As described above, the Merge will take place primarily through two hard-forks known as Bellatrix and Paris.

After Bellatrix, the Beacon Chain will constantly listen to the Ethereum mainnet and track the network’s total hashrate. As the hashrate of Ethereum continues to grow, the network will inch closer to a total terminal difficulty threshold, also called the TTD. A rough TTD value of 58750000000000000000000 was proposed after the Goerli Merge succeeded on which to activate the second hard fork of the Mainnet Merge, called Paris.

Given current hashrate projections, it is expected that a TTD value of 58750000000000000000000 will be reached on the network roughly 10 days after Bellatrix, around September 15th-September 16, 2022.

What is BitGo doing to support the merge?

BitGo will be supporting the transition to the new Proof of Stake (PoS) chain as the consensus layer for its Ethereum wallets.

BitGo has been actively preparing for the upcoming Merge (check out our recent discussion on the BitGo YouTube channel: ETH Merge — How Does This Affect You?) ensuring all wallets will work seamlessly after the transition to PoS consensus with no additional work needed by our customers. Effectively, nothing changes for your BitGo wallets, keys, ETH, or tokens.

How are BitGo clients affected?

On the Merge date, our team will open a brief maintenance window to ensure that the Merge executes safely across our system, and we will be closely monitoring post-merge for any issues that may arise. BitGo will be notifying our customers once the window has closed and all operations have returned to normal.

During the window, you can still:

• Receive transactions on-chain
• Build transactions but they may not be published to the network until the window ends

BitGo WBTC customers:

• BitGo will pause mint and burn requests for WBTC beginning approximately one hour before the time of the merge

How will BitGo handle unplanned forks?

• In the event of a Proof of Work fork, BitGo will assess the viability of that chain in terms of development and usage — at which point BitGo will make a decision regarding support for that chain, in accordance with our Fork Policy
• If needed, BitGo will re-index the PoW chain from the time of the Merge, which will maintain any digital assets on that new chain
• BitGo protects all transactions originating from our platform against replay attacks; for example if you have a confirmed transaction on the PoS chain (which will maintain the current chain ID), then that transaction cannot be “replayed” on a given forked chain, as the latter will necessarily have a different chain ID (for more information, see our blog post from the Bitcoin Cash Hard Fork)

BitGo is here to help our clients navigate through this transition period. For more on how we can help you to safely and securely participate in the Ethereum network, please email support@bitgo.com or reach out to your Customer Success Manager. We will also be sharing real-time updates here -status.bitgo.com.

About BitGo

BitGo provides the most secure and scalable solutions for the digital asset economy, offering regulated custody, borrowing and lending, and core infrastructure to investors and builders alike.

Founded in 2013 — the early days of crypto — BitGo pioneered the multi-signature wallet and later built TSS to improve upon other companies’ MPC offerings. Between multi-sig and TSS, BitGo offers the safest technology on the market and safeguards over 600 tokens across a wide variety of blockchains.

Over the years, BitGo has expanded from offering wallets into providing a full-suite solution that lets clients hold assets safely and then put them to work.

BitGo launched BitGo Trust Company in 2018, providing fully regulated, qualified cold storage to complement BitGo Inc’s original hot wallet solution. In 2020, BitGo launched BitGo Prime, which allows its clients to trade, borrow, and lend. Moreover, BitGo also provides access to DeFi, staking, NFT wallets, and beyond, and serves as the world’s sole custodian for WBTC, or wrapped Bitcoin.

Today, BitGo is the leader in digital asset security, custody, and liquidity, providing the operational backbone for more than 700 institutional clients in over 50 countries — a list that includes many regulated entities and the world’s top cryptocurrency exchanges and platforms. BitGo also processes approximately 20% of all global Bitcoin transactions by value.

For more information, please visit www.bitgo.com.

©2022 BitGo. All rights reserved. BitGo Trust Company, BitGo Inc., and BitGo Prime LLC are separately operated, wholly-owned subsidiaries of BitGo Holdings, Inc., a Delaware corporation headquartered in Palo Alto, CA. No legal, tax, investment, or other advice is provided by any BitGo entity. Please consult your legal/tax/investment professional for questions about your specific circumstances. Digital asset holdings involve a high degree of risk, and can fluctuate greatly on any given day. Accordingly, your digital asset holdings may be subject to large swings in value and may even become worthless.