Ethereum Merger brought about noteworthy changes and improvements – Here’s what you should know

The Ethereum protocol debuted in 2015 and has seen tremendous success ever since. However, the ETH community has always hoped for a few key upgrades to fully realise this blockchain’s potential.

The long-awaited Ethereum merger was finally executed on the 15th of September, 2022. The Merge means that the Blockchain upgraded from a proof-of-work mechanism to a proof-of-stake one. This revolutionised the Ethereum blockchain, which powers NFT’s and the like crypto ecosystem innovations.

It refers to the original Ethereum Mainnet, which combined with Beacon Chain (proof-of-stake Blockchain) to form a single chain. This further decreased Ethereum’s energy consumption by ~99.95%, but that’s only one of The Merge’s improvements.

If you’re too busy to watch the news but don’t want to miss out on the latest financial trends, this article can help clear your mind about proof-of-work and proof-of-stake and how they impact cryptocurrency, investors and miners worldwide.

Ethereum Proof-of-Stake vs Bitcoin Proof-of-Work

The main difference lies in how these issues are addressed. Unlike Proof-of-Work, which Bitcoin uses, validators in staking-based blockchains are not constrained by the need for an ample computing power because they are chosen randomly and are not in direct competition.

They are not involved in the process of mining blocks. Instead, they can create new blocks or confirm a percentage of transactions that reflect their stake in the transaction. For example, a validator who owns 3% of the staked cryptocurrencies could theoretically exploit 3% of the blocks.

Attesting refers to the process of validating a proposed block. A participant’s stake is forfeited, should they approve a potentially malicious block. Contrarily, they’re compensated for creating new blocks and organising transactions.

The Advantages to Ethereum’s using of Proof-of-Stake

Many investors might’ve dreamed of The Merge to boost their profits, but no one can predict the future or tell which crypto strategy is the best. While some voices say this event might solve crypto’s volatility problems and persistent liquidity, it’s up to anyone to decide how it impacted the current Ethereum price. However, there are aspects that Ethereum’s adhering to Proof-of-Stake should improve, and some of the main goals of using it are the following:

• To prevent faking crypto
• To prevent double spending
• To cut on energy consumption
• To remove the possibility of stealing.

Proof-of-Stake has the primary advantage of using less energy than Proof-of-Work, which is why it’s frequently presented as an environmentally friendly alternative. This consensus mechanism’s scalability is also improved: trading capacity can reach thousands, if not millions, of transactions per second.

Considering how many validating nodes are used, the general rule is “the fewer nodes, the faster the transaction”. Transaction fees become lower as a result of the cost savings for those who validate transactions on a cryptocurrency using Proof-of-Stake, costs that are high in the case of Proof-of-Work. In short, by staking, blocks can be created with much less expensive equipment and significantly lower energy consumption.

Disadvantages to Proof-of-Stake

The authority on Blockchain is given by the quantity of crypto held, which increases the likelihood of centralised ownership – an uncommon feature for the Blockchain and decentralised institutions. This malpractice can increase the chances that validators vote in their interest, leading to Blockchain’s corruption and favouring participants with large crypto stocks.

Another criticism of the algorithm is that “nothing is at stake”. Validators may be less interested in consensus, or lower rewards. Therefore, they may add invalid blocks to the Blockchain, especially if they generate two simultaneously, leading to temporary confusion about their network status.

From a 51% Attack perspective, an entity would need to own more than 51% of the staked tokens on the Blockchain to crack the system. For the time being, that would be impossible, given that networks using POS couldn’t bring together such well-gathered communities.

Pricey computer graphics processors repurpose

Many miners have feared The Merge since they were so accustomed to waking up to industrial wheezing. However, their graphic processing units seem to be able to serve other great purposes, too:

• Protein folding for cancer research
• The search for extraterrestrial life
• High-octane password cracking
• Building an artificial heart.

ETH miners can still mine out of love for contributing to the cryptosystem. But they must also accept that the mining world changed once The Merge occurred, and this service might no longer prove profitable. The event has completed a long-promised plan to phase out GPU mining and end Ethereum’s reliance on the traditional mining model.

And as Nick Hansen, the co-founder of Luxor stated recently, GPUs shouldn’t die; instead, they could prove helpful to other complex and energy-intensive projects. For example, DALL-E AI uses an exacerbated amount of computational power, so it could put expensive computer graphic processors to good use.

Investors’ Reaction to The Ethereum Merge

Many rejoiced at the thought of reduced energy usage, and it’s understandable why. As Diciconomist states, Ethereum’s CO2 footprint was as large as Finland’s, whereas now it can be compared to the Faroe Islands.

One Ethereum transaction equates to the CO2 footprint of 3 hours of watching YouTube or 44 Visa transactions. This improvement appeals to eco-friendly people and environmental activists and might even lead to more institutional investors being brought into the cryptocurrency world.

Companies, foundations and organisations like insurance companies and pension funds tend to adopt long-term investing strategies and don’t overreact to 24-hour news or trade on rumours. This means that crypto volatility and liquidity might be improved by the investments of institutions. They’d, therefore, enlarge the share of crypto investments and portfolio possessions, making it possible for start-ups and small and big companies to take on crypto payments faster.

Conclusion

The Ethereum Merge caused quite a stir in the cryptocurrency market for a good reason. It will most likely be remembered as a turning point in the history of Blockchain and a very noteworthy event in 2022.

The Proof-of-Stake consensus mechanism was created due to the need to address the issues that Proof-of-Work faces. It’s valued in the crypto community because it is more sustainable and eco-friendlier, reduced CO2 emissions and solved energy consumption, and these are anything but small achievements.