Ethereum Merge explained: what you need to know
“Ethereum Mainnet Merge Viewing Party” on YouTube was watched by 41,000 people when The Merge took place. People with bated breath watched the show with festivity, food, drinks and Merge talk!
Ethereum, outranked only by Bitcoin, is a blockchain best known for its cryptocurrency, ether (ETH), and its programmable capability. As a much-discussed and long-hyped event in the cryptocurrency community, the Merge represents a fundamental shift in the operation of the Ethereum blockchain.
What is the “Merge” and when did it happen?
Touted as one of the most substantial events for the cryptocurrency industry, the Merge is a tech upgrade which was executed on September 15, 2022. The Ethereum network moved from the energy-intensive “Proof-of-work” protocols to “proof-of-stake” protocols. With this upgrade, the energy consumption of Ethereum reduced by a whopping ~99.95%.
Why is it called a Merge?
From a technical perspective, Merge is a two-step process as a merger of the current Ethereum Mainnet and the Beacon Chain proof-of-stake system. Beacon Chain was successfully launched in 2020. The second step was the actual transition to proof-of-stake (PoS) consensus while officially deprecating proof-of-work (PoW).
What is PoW and PoS and how is it significant?
Proof-of-Work or PoW and Proof-of-Stake or PoS are both consensus mechanisms that are used in distributed networks to keep them secure.
In PoW, securing and validating a block is done by miners (computer graphic cards solving complex mathematical algorithms), in exchange for rewards and transaction fees. Since a lot of gas is required to issue new blocks, this model has been criticized for its enormous energy consumption.
In PoS, the network is secured by validators who stake their crypto assets as collateral and earn a reward. With this model, power consumption decreases dramatically since there is very little computation required. PoS also offers lower barrier to entry.
The Merge and energy consumption
After switching its consensus algorithm to PoS, the Ethereum blockchain has reduced its energy consumption and decreased its carbon footprint approximately by 99.99% each transitioning into an eco-friendly consensus model. Ben Edgington, Product Owner for Teku, an Ethereum 2.0 client, emphasized the beneficial environmental impact of Merge’s upgrade. “I feel very proud that we will be able to look back and say I’ve had a role to play in removing a megaton of carbon from the atmosphere every week. That’s something that meaningfully affects my family and others”.
How does the Merge affect the Ethereum ecosystem?
Ethereum users don’t need to update their wallets or funds since the wallet works the same way as they did pre-Merge. Even with the new consensus mechanism, the genesis remains intact and unaltered by the transition to proof-of-stake. However, the Merge does affect miners, node operators, and developers since they will have to familiarize themselves with changes in both the execution layer and the consensus layer.
What are the risks and flaws of the Ethereum Merge?
Any technology changes comes with its own set of problems and Merge is no exception. One of the major concerns regarding the Merge is that of centralization since it may increase the concentration of power within the network. With PoS, staking is required to earn interest on one’s ETH holdings, which could lead to situations where people who cannot afford to stake are priced out of market defeating the entire purpose of decentralization. Ethereum has also warned its users to be wary of scammers after the Merge.
Ethereum After the Merge
According to Ethereum’s co-creator, Vitalik Buterin, “this is the first step in Ethereum’s big journey toward being a very mature system, but there are still steps left to go. The next main area of our focus now is solving scalability issues”.