Ethereum Merge - All you wanted to know
📣📣📣The BIGGEST event in the history of crypto, since the launch of Bitcoin in 2009, is just over a month away – The Ethereum Merge!
Here is what it is and why is it important. And no, the gas fees is not going down!
First things first, let’s look at how the networks arrive at a consensus to issue the next block.
The computer network must arrive at a consensus before issuing the next block. Proof-of-work and proof-of-stake are two consensus mechanisms that help validate cryptocurrency transactions.
⛏Proof-of-work (PoW) is a competition between miners to solve cryptographic puzzles and validate transactions in order to earn block rewards. This requires computing power and is energy intensive 🔌🔌
💰Proof-of-stake (PoS)implements randomly chosen validators based on the amount of staked tokens for issuance of blocks and does not require raw computing power implying low energy use 🌳🌳
🚨Ethereum is transitioning from PoW to PoS.
🍀Why is it called the MERGE and what is happening?
Developers have been working on a hot-swap model to effect the transition from PoW to PoS. Think of it as changing the engine of an airplane from fuel to electric in mid-flight! ✈
On December 1, 2020, the Beacon Chain was created. The beacon chain has been running PoS consensus mechanism in parallel and independent to the Ethereum mainnet.
The merge represents the joining of the PoS consensus layer (Beacon chain) with the execution layer of Ethereum (Maninet). At this point, PoW will be permanently replaced by PoS as the blockchain continues to process transactions. 💥💥
🍀Two common misconceptions about the Merge
📌Transaction fee will go down: Merge is a consensus protocol switch over. For the transaction fees to go down the blockchain throughput has to change significantly.
📌Transaction Speed will increase significantly: With PoS the block time is likely to reduce from the current 13.3seconds to just over 12 seconds. A change that is unlikely to have a noticeable impact.
🍀So why is it important still?
🎯Sustainability - Reduction in electricity consumption by 99.95% v/s PoW 💥. This is huge and low energy usage will encourage more brands and NFT projects to build on Ethereum who have been concerned about the carbon footprint.
🎯Scalability – Transition to PoS sets the stage for further scalability upgrades that were not possible under PoW. We should see higher throughput capability getting built over a period of time.
🎯Security - Increased security with a switch to PoS. The importance of increased security can never be overstated.
Ethereum processes billions of dollars worth of transactions every day. The underlying technology needs to be ready for the next level of growth while being good for the planet. Ethereum is battle tested and this migration makes it stronger for an ever-demanding future.