Author : Naveen Prasad, Consumer Products, Fintech, Web3, Investments September 16, 2022
Ethereum, the second largest blockchain network behind Bitcoin, has completed the shift from proof-of-work to proof-of-stake. On September 15, one of the most significant occurrences in the crypto industry, called the "merger," occurred. The entire crypto world was eagerly awaiting the merger, which had been in the works for six years.
Following the merger, the Beacon Chain (currently only used for testing) will serve as Ethereum's consensus layer, storing and managing the register of validators—these validators will assist in protecting the network by bundling transactions into blocks for inclusion on the blockchain. Meanwhile, Ethereum's POW mechanism will be decommissioned indefinitely.
In the proof-of-work method, the validators (those who validate the transactions) must solve complicated mathematical challenges. A large quantity of energy is required to power computers, and this must be done at every transaction. As a result, the procedure was inefficient.
Validators, on the other hand, must have a significant stake in the blockchain to validate transactions under proof-of-stake. It means that Ethereum users will need to spend a significant amount of money on the cryptocurrency to validate transactions.
According to experts, when compared to Bitcoin, PoS can save up to 99 percent of the energy used in mining. Vitalik Buterin, the co-founder of Ethereum has stated that he hopes to reduce the amount of energy used by PoS by 99.95%. Reduced energy use will also allow institutional investors to trade more.
Buterin, the inventor of Ethereum, also stated that the merger would lower global power use by 0.2%. Blockchain technology has long been criticized for harming the environment and consuming vast amounts of electricity.
With the merger, Ethereum formally said farewell to its miners, who were responsible for block validation in its prior PoW avatar. Naturally, these ETH validators, who earned over $19 billion last year by mining the token, are alarmed.
The Merge is anticipated to help further decentralize Ethereum by democratizing access to the validator set. This will also increase its security over time since more participants will make it more difficult and costlier to plan a 51% attack.
Investors and users will reap the rewards sooner or later. More users may ultimately join as a result of faster transactions and lower expenses, which may affect the price of ether, the platform's native cryptocurrency that investors use to perform transactions.