What are the major risks with the Ethereum Merge?

With thousands of apps running on Ethereum and millions of transactions flowing through its network, any issue could seriously impact Ethereum’s price and reputation.

As Prime Trust’s Chief Product Officer puts it, “you have two planes midflight and you’re swapping engines” (Protocol).

What are these potential risks?

1/ Technical glitches could occur if part of the network fails to update their software. With software upgrades, it’s difficult to anticipate every issue. To prevent this, the Ethereum Foundation raised its bug bounty to $1M on the most critical bugs — 4x higher than the previous number.

2/ A duplicate version (fork) of the old Ethereum network could be created. The upgrade makes miners useless in the new network. In retaliation, miners could duplicate the old network — creating two competing parallel networks, Eth1 (old PoW) and Eth2 (new PoS).

3/ Hackers find a vulnerability in the upgrade. During a 2016 Ethereum upgrade, hackers took advantage of a vulnerability to steal user tokens. During the Merge, Coinbase will briefly pause token deposits and withdrawals as a “precautionary measure.”

4/ The Merge gets delayed… again. This is a risk the community is all too familiar with. Yesterday, the Merge process began with the first software update. But Ethereum developers discovered a bug — which was patched up the next day.

It’s going to be a bumpy ride, but Ethereum developers have worked hard for years — having run successful Merges on three test networks over the past few months.

If something goes wrong: In the absolute worst-case scenario, Ethereum developers could roll back to a previous state of the blockchain — but there are serious negative consequences.

Hal Press of North Rock Digital put a “5% risk of something going wrong the day of the Merge” with a 40% price decline. If everything goes right, he sees a 10% price increase on the day of.

Another perspective by Bankless: Is the Merge overhyped?