One of the most eagerly awaited cryptocurrency events in history is the Ethereum Merge.
Learn more about The Merge’s purpose, need, and potential difficulties.
- The change from Proof of Work (PoW) to Proof of Stake as the Ethereum blockchain’s consensus method is referred to as The Ethereum Merge (also known as The Merge or Ethereum 2.0) (PoS)
- The Merge’s supporters anticipate that it will minimize energy use, boost decentralization, and pave the way for the next enhancements that could reduce gas costs, increase scalability, and speed up transaction times
- The Merge’s soft target date has been set as September 15, 2022
- The Merge will be the first time PoS is applied on this scale, thus there may be significant difficulties, including the potential for delays
What Is The Ethereum Merge?
The Merge, formerly known as Ethereum 2.0, is the much-anticipated switch from the Proof of Work (PoW) consensus process to the Proof of Stake consensus mechanism for the Ethereum blockchain (PoS).
PoW and PoS are protocols for adding transaction-containing blocks to the blockchain as well as for confirming and achieving consensus on the accuracy of the transactions. At the moment, the PoW mechanism is used by the two most widely used blockchains, Bitcoin and Ethereum.
With PoW, miners compete with one another by leveraging their combined computing power to create blocks that contain transactions. This calls for the use of specialized, energy-intensive computer gear to solve a challenging mathematical puzzle.
In the case of Ethereum, the native currency of the blockchain (ETH) is awarded to the first miner who successfully completes the puzzle in order to create a new block. PoW has more energy consumption and less scalability than PoS, which are its key drawbacks.
Validators, as opposed to miners, propose new blocks and validate transactions in a PoS system. Validators must stake a certain quantity of native currencies as collateral in order to participate in this procedure.
An algorithm determines which validator gets to propose a new block of transactions instead than competing to create new blocks. The blocks of transactions are then added to the blockchain once a specific number of additional validators have confirmed the transactions as accurate.
Then, native coins are given to the validators. Those who fail to validate transactions (for example, by staying offline) or validate fraudulent transactions risk losing the collateral they staked.
Because in actuality it will occur when Ethereum developers merge the mainnet of Ethereum, which is PoW, with the Beacon Chain, the conversion of Ethereum to PoS is known as “The Merge” (a separate PoS blockchain the developers have set up to facilitate the transition).
Why Is The Ethereum Merge Required, and What Is the Impact?
Creating the Foundation for Better Scalability
Cracking The Blockchain Trilemma, a hypothesis that claims blockchains can only fulfill two of the three goals of security, decentralization, and scalability, but not all three, is one of the blockchain’s holy grails.
Read more about The Blockchain Trilemma.
Scalability problems are now plaguing Ethereum, which is probably the most crucial aspect of expanding the user base. Transactions have increased as a result of the growing use of cryptocurrencies and the massive expansion of decentralized applications (dapps) that make use of the Ethereum blockchains, such as those connected to DeFi, NFTs, Metaverse, and GameFi.
Slow transaction speeds have, however, made it difficult for Ethereum’s network to keep up. The resulting network congestion has also caused gas fees (Ethereum’s transaction fees) to soar, making the blockchain unusable for the great majority of individuals.
The first step toward future upgrades like sharding, which are anticipated to greatly increase transaction speeds and lower gas costs, is the transition to PoS. Therefore, many people anticipate that The Merge will mark the beginning of a new chapter in enhancing the scalability of the Ethereum blockchain.
Reduces Energy Consumption
PoS uses less energy than PoW because fewer miners are required to compete with one another using powerful computers, which wastes a lot of energy.
The Ethereum Foundation claims that switching to PoS will reduce the Ethereum blockchain’s energy consumption by approximately 99.95%.
Read more about energy consumption in crypto here
Enhances Decentralisation and Security
Supporters of The Merge claim that because PoS has lower entry hurdles for validators than PoW, it will promote the decentralization and security of the blockchain. Because miners must purchase pricey computer equipment (also known as mining rigs) and pay significant electricity costs in order to compete to be the first miner to create blocks, PoW has high entry barriers.
A lower entry barrier may increase security by decreasing the possibility that a small number of validators may control the validation process.
However, opponents point out that validators who have more ETH placed as collateral may have a higher chance of getting selected, suggesting that people who have access to larger reserves of ETH will have an excessive amount of influence on the validation process.
Potentially Impacts Supply, Causing ETH to Become Deflationary
The two opposing forces of issuing new ETH coins and destroying current ETH coins have the greatest impact on the supply of ETH currencies (the removal of existing ETH coins from circulation)
Due to the present PoW and PoS implementations on the Ethereum mainnet and beacon chain, fresh ETH coins are created to compensate miners and validators, respectively. However, the necessity for PoW mining rewards will disappear once the Ethereum network switches to PoS.
Some commentators think that this should lead to a decrease in the overall issuance of new ETH coins, perhaps making ETH deflationary, or gradually reducing its supply.
The Timeline: When Is The Ethereum Merge?
Years have passed while The Merge has been slowly upgraded and put through testing as engineers try to fix problems along the way. On the road to The Merge, significant checkpoints include:
- Beacon Chain launch in December 2020
- London hard fork in August 2021
- Altair upgrade in October 2021
- Arrow Glacier upgrade in December 2021
- Kiln testnet merge in March 2022
- Multiple mainnet shadow forks starting in April 2022
- Ropsten testnet merge in June 2022
- Gray Glacier upgrade in June 2022
- Sepolia testnet merge in July 2022
- Goerli testnet merge in August 2022
The Ethereum mainnet and Beacon Chain will be merged on July 14, 2022, setting a soft target date of September 2022 for the Ethereum blockchain to finally switch from PoW to PoS.
Challenges of the Ethereum Merge
PoS is difficult to implement, as shown by how far Ethereum has come in The Merge’s development and how long it has taken. The Ethereum developers have set a soft target date of 15 September 2022, however, it is still possible that delays could be disclosed.
Not Yet Undergone, Such a Protracted Battle Test
Despite adopting PoS, most rival blockchains don’t have the volume of transactions that the Ethereum blockchain does. As a result, the Merge will mark the first time PoS has been deployed on this scale, and it is unclear whether everything will go according to plan.
One of the most eagerly awaited events in the cryptocurrency world is The Merge, the biggest update in Ethereum’s history to date. The Ethereum blockchain’s fundamentals are expected to undergo significant advancements as a result, with scalability being likely the most significant change.
Mark your calendars because developers have established a soft target date of September 15, 2022. Delays, meanwhile, could still pose a threat to The Merge.
Also Read: How To Cash Out Cryptocurrency
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