WHAT IS THE ETHEREUM MERGE

WHAT IS THE ETHEREUM MERGE On the 15th of September 2022, Ethereum completed their transition from a proof of work blockchain to proof of st...

WHAT IS THE ETHEREUM MERGE

On the 15th of September 2022, Ethereum completed their transition from a proof of work blockchain to proof of stake. But, what exactly was “The Merge” and what does it mean for Ethereum. Let's explain it to you in simple terms.

WHAT HAPPENED

The original Ethereum blockchain which has been running since the genesis block in 2015 employed a proof-of-work (POW) mechanism. While POW is great for both decentralization and security, it's not so great for energy consumption and a constant criticism of POW blockchains such as Bitcoin and Ethereum is their wasteful energy usage. 


Ethereum decided to make the switch to proof-of-stake (POS) which has far less power demands, but it's not easy to make this switch on a blockchain which is already running and has hundreds of dapps and billions of value tied up in it. No mistake could be made. For this reason, in 2020 Ethereum created a separate blockchain called the “Beacon Chain” and ran it in parallel with the existing chain. All the existing accounts , balances and smart contracts running on it. Nothing was rushed and the Beacon Chain ran solidly for two years to ensure there were no unwanted surprises. 


Once everything was in order on September 15th 2022, the two chains were “merged” in the event which came to be known as the merge. They now exist as a single proof-of-stake blockchain.


The new chain also saw the combining of the execution layer which handles transactions and execution, and the consensus layer which handles the proof-of-stake consensus.

WHAT ARE THE BENEFITS

Perhaps the most obvious benefit to outsiders is the massive reduction in energy consumption of the new chain. It is estimated that Ethereum now uses approximately 99.9% less power. This is truly a massive reduction and Ethereum can now be considered one of the greenest blockchains. 

WILL IT BE FASTER AND CHEAPER

Two of the other major criticisms of Ethereum are the cost to use it and its tendency to get congested when busy. There seems to be some confusion as to whether the merge would help with these aspects. The simple response is no, but its a little more complex than that. With regards to network congestion, the plan was to implement sharding (a technique to improve speed) before the merge. 


However, in the last few years a proliferation of layer-2 scaling solutions have appeared and are dealing with making things faster (and cheaper) without the need for this to be implemented at the base layer. Sharding is still in development for Ethereum and will most likely be implemented now that focus can switch away from the merge.


With regards to fees on Ethereum,  the Merge was primarily a change to the consensus mechanism of the network and not an expansion of the capacity of the network. It was not, in fact, ever designed to reduce fees. Reduction in fees will come with sharding and continued development of Layer-2 solutions.


The fact that the Merge passed without incident was a significant milestone not just for Ethereum but for the entire crypto landscape. Renewed trust in the ability to secure value on-chain will be strengthened based on this event. All in all, it's a positive for everyone in the industry. 


For more beginner’s guides on complex crypto topics be sure to visit www.comparebitcoinexchange.com

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