The 15th of September saw a long-awaited update hit the crypto world: The Ethereum merge. The merge that saw the original blockchain powerhouse successfully transition from the proof of work (PoW) to the proof of stake (PoS) consensus algorithm.
The merge formed one of the biggest out of a wide series of updates that Ethereum has in store for between now and 2024 to secure its position as the blockchain of the future. More scalable, more environmentally friendly, and affordable in mainstream transactions.
Any major update, such as The Merge, naturally brings new and exciting opportunities and a lot of questions. Today, we’ll delve into what The Merge means for Ethereum, cryptocurrency as a whole and, most importantly, what it means for you!
By the end of this article, you’ll have a working knowledge of the difference between proof of work and proof of stake consensus mechanisms and what the latter can bring to the crypto industry. Plus, if you’re interested in investing in crypto for the future, we’ll also reveal some tips and tricks to do so safely and securely.
It Has The Ability To Make Ethereum Energy Efficient
Firstly, the first major change that The Merge has brought to the world’s biggest blockchain is the ability for Ethereum to become more energy efficient. Before the implementation of The Merge, Ethereum’s energy consumption was enormous and was a huge drawback to its scalability and potential for mainstream adoption.
The reason behind this enormous energy consumption was due to the previous algorithm Ethereum used (proof of work). PoW saw the people mining Ether in competition with each other as they raced to add new blocks to the Ethereum blockchain and mint new ETH currency. The success rate of each miner was proportional to how much computing power they could muster. Put simply, the more computing power a miner had, the more Ethereum they could mine.
Worldwide, countless powerful computing systems were working overtime to mine Ether and required enormous amounts of power to maintain. But, naturally, this was massively energy inefficient. At the height of the cryptocurrency bull runs in 2020 and 2021, Ethereum’s energy consumption was similar to that of a medium-sized country like Uzbekistan. In contrast, its energy consumption was almost the same as that of Azerbaijan.
However, following the successful rollout of The Merge, Ethereum will see its overall energy, consumption plummet by over 99%. Overall, it’s expected that the latest update to Ethereum will see more than 110 TWh (110 billion kilowatt-hours) saved each year.
This is because The Merge successfully replaced the proof of work algorithm with the alternative proof of stake algorithm. In contrast to proof of work, proof of stake replaces energy-consuming miners with people called validators. Their role is to verify transactions that take place across the Ethereum blockchain and accurately record them on a new block. This consensus system needs far fewer people to operate successfully when compared to proof of work. As a result, it is enormously energy efficient in comparison and undoubtedly an inspiration for many other cryptocurrency projects, thus providing a positive outlook for the future of the energy-efficient crypto industry overall.
The Foundations Are Set For Web 3.0
When it first hit the scene in 2015, Ethereum had bold ambitions to be a blockchain project that could provide a range of functionality and better potential for scalability than the likes of block-limited projects like Bitcoin ever could.
With that mission in mind, Ethereum has gone on to achieve great things and has performed much better than even its biggest fans could ever have predicted. One of the major areas Ethereum has excelled in is that of Web 3.0, thanks to its ability to process financial transactions, host and store non-fungible tokens (NFTs), and host smart contracts.
Thanks to the numerous benefits of The Merge being implemented, the enormous flow of data across the Ethereum blockchain has been streamlined massively. For example, under the old consensus method, Ethereum could handle around 15 transactions per second. But after The Merge, Ethereum is now eyeing having the ability to handle around 100,000 transactions per second.
Impressive, right? Well, it’s even more impressive when you realize that 100k transactions a second is significantly more than some of the world’s biggest centralized payment providers like Mastercard and Visa can ever dream of being able to handle.
It’s worth noting that Ethereum’s ability to process 100,000 transactions a second hasn’t hit the scene. However, it’s expected to be achieved after Ethereum’s next major update, ‘ The Surge’.
Increased Savings For Validators Will Cause Their Numbers To Surge
For the new proof of stake algorithm to work successfully, Ethereum needs to attract validators as it did with miners. Thankfully, the Ethereum development team have created quite the incentive to not only attract validators but to keep them actively working on the Ethereum blockchain, too.
One of the main reasons is the major reduction in energy consumption The Merge will achieve by replacing the mining system with a system of transaction verification instead. This means that, under the proof of stake system, the Ethereum blockchain has achieved a significant level of cost-effectiveness for people possessing ETH and who wish to provide validation services to the Ethereum blockchain. Let us explain.
The new Proof of stake (PoS) consensus algorithm needs those who hold ETH to lock up a specific amount of their crypto on the network to participate in the transaction verification process and become a validator.
When a person holding Ethereum has staked the required amount, a random algorithm selects them to add new blocks to the blockchain individually. This means that, instead of vast amounts of computing power, validators only need to hold a certain amount of Ether to stake and take part. Currently, the minimum stake required to become a validator is 32 ETH. However, there is also the more affordable and accessible option of joining a staking pool, too.
Overall, this will see validators granted the opportunity to make enormous savings whilst still having the ability to acquire Ether. By removing mining from the equation, validators will be alleviated of the enormous cost of high-powered computing systems and the costly energy consumption required. They will then be able to assign more of their finances and resources to purchase more ETH to stake.
And if you think it can’t get any better than that? It can! As an additional incentive to get validators on board and keep them there, It’s expected that ETH rewards for validators will rise by more than 9%.
It Will Lead To More Demand for Decentralized Apps (DApps)
Since Ethereum hit the crypto industry, it has been a solid foundation of some of the world’s biggest decentralized applications, often referred to as DApps. Following the successful implementation of The Merge, Ethereum’s extensive portfolio of decentralized apps it hosts is expected to grow even more.
For example, 2022 has seen a surge in popularity surrounding the likes of non-fungible tokens and Play to Earn (P2E) games. With Ethereum now offering a high-speed and efficient consensus algorithm, developers can now build faster and more flawlessly than ever before. Naturally, this will see Ethereum’s usebase grow in sync, bringing with it increased value and functionality.
The Chance For Ethereum To Take Advantage of Pro-Green Capital
Those rightfully passionate about the preservation of the environment have naturally been largely anti-cryptocurrency overall. After all, who can blame them? Prior to The Merge, major blockchains and cryptocurrencies like Ethereum were massively energy inefficient due to the electricity-hungry process of mining. However, things are about to change.
With The Merge causing Ethereum’s energy consumption to plummet due to the expensive and energy-consuming process of mining no longer being needed, it can become environmentally friendly and subsequently tap into a powerful source of new capital in the form of pro-environment investors who have previously acknowledged the numerous phenomenal benefits of blockchain technology. Still, they couldn’t bring themselves to invest due to the environmental impact it was causing. Now, Ethereum can provide a safe, environmentally friendly way to invest in the blockchain, as it should be!
In turn, a more environmentally-friendly Ethereum blockchain will undoubtedly be able to attract more green-friendly funding initiations and bring a huge source of new capital to the already-powerful blockchain network,
Overall, this energy-efficient and pro-environment approach adopted by Ethereum is great news for the crypto industry because new and existing digital currencies hosted on the Ethereum blockchain will naturally shift to a pro-environment approach.
The Merge Is Promising, But How Do YOU Get On Board for The Future?
If this insanely promising news for Ethereum and the crypto industry as a whole has got you excited and you wish to invest in Ethereum, hold your horses! If you’re new to this, it’s important to do it correctly.
The price of Ethereum could skyrocket in the wake of the coming updates, but the cryptocurrency market is volatile by nature. So before you invest, do your research and be sure you know what you’re getting into it. Ideally, speak to a financial advisor about the risks involved beforehand.
Then, if you’re keen to move forward, make sure you don’t fall into the trap of the numerous dodgy platforms out there. Instead, use a popular and highly-recommended app or platform like Bitcoin-loophole.io.
What Does The Future Hold For The Merge And Ethereum?
To sum up, The Merge has replaced the energy-hungry proof of work consensus for the environmentally and financially-friendly method of proof of stake and brought a wave of promising benefits to the Ethereum blockchain that can see it surge into the future at full-speed.
However, The Merge is merely the second out of a five-stage plan for Ethereum to transform itself into an affordable, scalable, and overwhelmingly powerful network for the decentralized world.
The next stage of Ethereum’s plan is called the Surge and is expected to bring enormous scalability to the original blockchain network. The Surge will introduce blockchain sharding that will secure Ethereum with the ability to operate at exceptionally fast speeds and potentially become a rival to the world’s biggest payment processors like Visa and Mastercard.
Stage four is called The Verge which plans to utilise a revolutionary technology known as “Verkle trees” to truly optimise the enormous level of data storage on the Ethereum blockchain.
And then there is The Purge. Not to be confused with the popular horror movie franchise of the same name, there’s nothing scary about this! The Purge will remove old data and technical debt from the Ethereum blockchain and free-up vital hard drive space in order for validators to operate more freely and efficiently.
And last but not least is The Splurge. The fifth and final update will see the final wave of optimization brought to the Ethereum blockchain and secure the original blockchain network as the fastest, most efficient and most scalable one around.
In summary, the future is bright and it’s looking like Ethereum!