Currently scheduled for mid-September, the Ethereum network is planning its most significant update in years—a change of consensus from "Proof-of-Work" to "Proof-of-Stake". This event is commonly referred to as, "The Merge."
The purpose of this article is to describe the important implications for users of Aurora.
Implications of the Merge
At the end of this post, we’ll include links to detailed articles about the Merge, but in this section we’ll provide a brief overview.
At the moment of The Merge, the Ethereum network may split—known as a "fork"—into two or more chains, of which at least:
- A continuation of the existing Ethereum network, validated by miners using the Proof-of-Work approach, referred to as 'PoW-chain'
- A new chain validated through the Proof-of-Stake approach, which we will refer to as "PoS-chain".
At that moment, an interesting situation will occur in that the PoW-chain and PoS-chain networks will be identical.
- If you have 10 ETH and 5 AURORA on the PoW-chain, you will have 10 ETH and 5 AURORA on PoS-chain.
- If you have BTC & USDC in a liquidity pool on the PoW-chain, you may also have BTC & USDC in a liquidity pool on the PoS-chain.
Just like the big bang, what happens after that moment can only be speculated, but the networks will begin to diverge.
Here's what we know:
- One chain should eventually be the "winner", meaning we might see it be the chain that the most of the Ethereum community will support and refer to as "Ethereum".
- It's generally expected that the new PoS-chain that the Ethereum Foundation is introducing will continue to receive most of the support going forward.
- It seems likely that the PoW-chain will continue, with miners processing blocks as normal.
- We assume assets and protocols on the PoS-chain will continue to behave in terms of value and function as they previously did on PoW-chain.
- Aurora believes in the effort behind the PoS-chain initative and should the majority of the community support it as well, we will stand behind it, too.
Implications for Aurora Users
For Aurora users, the main implication relates to contact point between Aurora and Ethereum—i.e. the Rainbow Bridge.
While you can learn more about Rainbow Bridge works here, in short, when you bridge tokens from Ethereum to Aurora, your assets are locked in a smart contract on Ethereum and you receive an IOU equivalent token on Aurora. When you bridge them back, the assets on Ethereum are released from the lock.
At the moment of the Merge, there will be identical Rainbow Bridge smart contracts on the PoW-chain and the PoS-chain, holding an equivalent amount of equivalent assets in each.
- When you bridge assets from Aurora to Ethereum, you will receive the expected amount of assets on the PoS-chain. Everything will appear as normal.
- Ensure you have NO pending transactions on the PoW-chain prior to The Merge to avoid loss of funds. All transactions must be finalised prior to the The Merge.
An important question, however, is what happens to the assets locked in the PoW-chain Rainbow Bridge, after the Merge?
All assets will remain safe and secure and several options will be available. We have to assess the situation after The Merge, and then execute on a plan of action regarding those assets.
The AURORA token on the chain that receives little to no support from the community will not continue to be a part of the official AURORA supply, and eventually will not continue to be supported by the Aurora Network.
Pausing of the Rainbow Bridge
At the moment of the Merge, a number of technical risks exists; for example, "transaction replay attacks", among others.
To mitigate these risk, the Rainbow Bridge's interaction with Ethereum will be paused 1 to 3 days before The Merge, which is expected to take place anytime from September 10th to September 20th. We will resume its operation after the Merge, as soon as we feel certain about the safety of the winning network.
Note that we will not pause transfers between NEAR and Aurora during this time.
We strongly recommend all pending transactions be finalised before the bridge is paused in order to prevent any loss of funds.
Around mid-September, it is planned that the Ethereum network will fork, and the "winning" chain will be Proof-of-Stake, what we've referred to here as the PoS-chain.
As an Aurora user, the main thing you need to be concerned with is the operation of the Rainbow Bridge around that event. To mitigate risks, we will pause the bridge shortly before, and reenable it shortly after the Merge, targeting the winning Ethereum chain.
Unknown issues include what will happen with assets and protocols on the losing chain. With regards to the assets locked in the Rainbow Bridge on the losing chain, a plan of action will be formed post-Merge, and our primary goal will always be to make sure that the Ethereum network transition period is as seamless and secure as possible for users of Aurora's products and their funds.
Updates about the Merge will be posted to our Twitter account as we get closer to the event. In the meantime, be sure to raise any questions or concerns you have in the #merge channel in our Discord.