The cryptocurrency exchange creates stability by taking several interim actions while integrating Ethereum with the Beacon network
Ether (ETH) and ERC-20 tokens when the blockchain switches to a proof-of-stake (PoS) chain in September.
The world’s largest exchange by transaction volume has announced the move in a bid to provide stability during ‘The Merge’ which is touted to take place in mid-September 2022. Binance is the second major exchange to announce the suspension of ETH deposits and withdrawals. Coinbase did the same in August 2022.
According to Binance, the exchange is timing suspensions with two important upgrades that will facilitate Ethereum’s switch from proof-of-work (PoW) to PoS. The exchange noted that a new token could be created during a hard fork, which would require measures to reduce transaction risk and ensure the safety of vulnerable users of funds from price fluctuations.
Binance will suspend deposits and withdrawals for ETH and ERC-20 tokens on Sept. 6 during the Bellatrix consensus layer upgrade and on Sept. 15 when the Paris execution layer upgrade is scheduled.
The exchange also suggested two scenarios it deems likely to occur during the Merge. Scenario A considers that no new token is created, which would see Binance reopen deposits and withdraws for ETH and ERC-20 tokens as a matter of priority.
The second scenario assumes that the Ethereum chain splits into two competing chains with the possibility of creating a new token. In this possible outcome, Binance will use the ETH ticker for the Ethereum PoS chain.
The exchange will then credit Binance users accounts with the forked token from the minority chain at a ratio of 1:1. This will be based on a snapshot of ETH balances before the Paris execution layer upgrade scheduled for Sept. 15.
Binance has indicated that withdrawals for a potential forked token will be supported and details of distribution will be addressed in a separate announcement closer to the time.
ETH and ERC-20 spot trading will not be affected during The Merge while users are Asked to take risk measures during hard forks when prices fluctuate. Binance will also suspend ETH cross and isolated margin borrowing between Sept. 14 and 16, while it noted that ETH cross and isolated margin pair should not be affected.
Trading of USDⓈ-M and COIN-M ETH Futures Contracts are also expected to be unaffected but Binance has indicated that it could take additional protective measures such as adjusting margin tiers like maximum leverage value and maintenance margin.
Ethereum PoW miners can transfer their hash rate to the Ethereum Classic Binance Pool once the Merge has taken place.
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