If you’ve been following cryptocurrency news lately, you would know that the Ethereum “Merge” is upon us.
More specifically, on 15 September 2022.
But what exactly is this merger? And more importantly, how will this affect you?
Let’s find out!
TL;DR: The Ethereum Merge
- The Merge marks the transition of the Ethereum blockchain from a proof-of-work to a proof-of-stake model.
- There’s an expected 99.95% decrease in energy consumption associated with processing Ethereum transactions
- Users of Ethereum and Ether token (ETH) will not need to do anything before or after The Merge.
Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. āMAS strongly discourages investing in cryptocurrencies and has deemed that they are not suitable investments for the public. Readers should always do their own due diligence and consider their financial goals before investing in any investment product.
What is The Ethereum Merge?
To put it simply, the Ethereum Merge is one of a series of upgrades that changes the Ethereum blockchain from a proof-of-work to a proof-of-stake model.
Investopedia: Proof of Stake (POS) uses randomly selected miners to validate transactions. Proof of Work (POW) uses a competitive validation method to confirm transactions and add new blocks to the blockchain.
In other words, Ethereum mining will no longer be possible after The Merge and validating transactions will be done by staking Ether (ETH).
According to ethereum.org:
The Merge represents the joining of the existing execution layer of Ethereum (the Mainnet we use today) with its new proof-of-stake consensus layer, the Beacon Chain.
What Will Happen to Ethereum and ETH After the Merge?
With the new proof-of-stake model in place after The Merge, there will be a reduction of Ethereum’s energy consumption by a whopping ~99.95%!
This addresses a big criticism of cryptocurrencies not being environmentally-friendly andĀ marks the end of proof-of-work mining on Ethereum.
For the uninitiated, crypto mining requires the usage of high-powered computers, which in turn consume lots of electricity and leave a high carbon footprint.
On top of that, The Merge will set the stage for future upgrades which cover scalability, security, and sustainability.
Note: There will be no change to the operations of Ethereum-based applications or ETH.
Do I Need to Do Anything if I Hold ETH?
For those of us who are users or holders of ETH, or any other digital asset on Ethereum, you will NOT need to do anything at all as the changes will take place seamlessly and automatically.
As such, be on the lookout for possible scams that tell you to “upgrade to ETH2” or something similar.
What Is The Difference Between ETH and ETH2?
Recently, the term “ETH2” will be slowly phased out.
With The Merge, there will no longer be two distinct Ethereum networks; there will only be Ethereum.
Thus, to limit confusion, “ETH1” is now the “execution layer”, which handles transactions and execution while “ETH2” is now the “consensus layer”, which handles proof-of-stake consensus.
Why Does The Merge Matter?
Whether you are a crypto investor or not, The Merge is a pretty significant milestone for cryptocurrencies. The upgrade will put pressure on other proof-of-work cryptocurrencies such as Bitcoin and other “Ethereum-killers” such as Solana and Polkadot to switch to a more environmentally-friendly alternative.
Moreover, with the end of Ethereum mining, there will be less demand for graphics cards and computers. We’re already seeing a drop in graphic card prices, which is a welcome sight for Singaporeans who want to build or buy their own gaming computers.
With cryptocurrencies here to stay and a shift towards sustainability, this is a step towards a more sustainable future in the financial world.
