Ethereum's 'Merge' Will Happen Tonight
BY TYLER DURDEN
WEDNESDAY, SEP 14, 2022 - 08:00 PM
The much-anticipated 'Merge' is upon us...
Based on the latest countdown, Ethereum users expect the massive network upgrade to begin around 10pm PST, with the second-largest crypto is set to shift to a more environmentally friendly model that may help attract investors who opine that bitcoin’s model uses too much electricity.
The Ethereum blockchain will transition away from its energy-intensive consensus mechanism Proof-of-Work as its execution layer merges with the new Proof-od-Stake consensus layer known as the Beacon Chain.
The so-called 'Merge' is like upgrading a rocket ship after its launch: "It is an epic engineering feat."
As Cointelegraph previously reported the Merge will see ETH, the native currency of the Ethereum ecosystem, remain once the mainnet joins the Beacon Chain.
It is worth noting that some PoW miners that previously mined blocks and maintained the execution layer have indicated that they will continue to do so.
The PoS-powered Ethereum blockchain will continue to use ETH after the Merge, while another hypothetical PoW Ethereum network, dubbed ETHPOW, could fork away with the creation of an ETHW token.
The last 24 hours or so - thanks in large part to yesterday's CPI-charged chaos - Ethereum has traded lower, but stabilized today around $1600...
As WSJ reminds, Bitcoin pioneered the proof-of-work model where a global, decentralized network of computers processes transactions and adds them to the blockchain by generating random numbers in hopes of finding the right combination to unlock formulas.
The miners receive newly minted bitcoins as rewards.
In the proof-of-stake model Ethereum is moving to, validators put their crypto holdings on the line to verify transactions.
The “staked” ether tokens act as collateral that can be destroyed or confiscated if the validators behave dishonestly.
The validators accrue interest payments on their staked assets as a reward.
For example, staking on the ethereum blockchain prior to the merge would fetch a 4.1% annual percentage rate, according to the Ethereum Foundation.
Simply put, ethereum’s big makeover means it will take a lot less energy to verify transactions, slashing energy consumption by more than 99% will also go a long way toward lowering the barrier to entry for institutional investors, who have been battling the optics of contributing to the climate crisis.
One River's Sebastian Dae noted earlier in the week that, it’ll be boring if all goes according to plan, nothing like the excitement of watching the force of a rocket launch. Alas, the dream of every successful layer 1 is precisely that – to be a boring, secure platform that is eventually taken for granted, invisible to the users who demand more from their tools. The Merge is one step closer to that reality.
The actual process is expected to take about 12 minutes, during which time about 150 developers will be on high alert to address any potential hitches.
As Decrypt writes, the merge was originally called “Ethereum 2.0,” but that name was retired in favor of rhyming names for each step: merge, surge, verge, purge, and splurge.
The Ethereum Foundation is holding its own livestream to watch the transition from the current 'proof-of-work' network to its new 'proof-of-stake' paradigm...
Proof-of-Work and Proof-of-Stake are arguably the best-known consensus mechanisms - but new ones are continually emerging.
PoW blockchains have long dominated the cryptocurrency landscape, with both Bitcoin and Ethereum using this model. This means miners are responsible for securing the network and validating transactions — and they get rewarded with new coins as a result.
However, a common criticism surrounding Proof-of-Work relates to how much energy it uses, and the impact such blockchains have on the environment. Miners need to use vast amounts of computing power to solve arbitrary mathematical equations. More advanced hardware has been required as the industry matured, with electricity usage surging too.
This has led Proof-of-Stake to be regarded as a more eco-friendly approach. Miners are replaced by validators — nodes that have a financial stake in the smooth running of the network. While proponents claim this can use 99% less energy than PoW, some fear PoS can lead to greater levels of centralization and censorship. Ethereum is currently in the process of moving to this consensus mechanism during The Merge — and it'll be interesting to see how this high-stakes experiment pans out.
A new approach is known as Published Proof-of-Contribution, otherwise known as PPoC for short. Here, every single participant has a role to play in ensuring the ecosystem is decentralized, democratic and well-governed.
According to one estimate on the Ethereum Foundation’s blog, the merge will result in a reduction of at least 99.95% in total energy use, but not everyone is clear on the benefits.
“There are some misconceptions among the wider public around what kind of benefits the Merge is going to bring,” Henry Elder, Head of DeFi at digital asset management firm Wave Financial, told Decrypt.
“It's not going to make Ethereum faster, more scalable and cheaper. It's just Ethereum that goes from proof-of-work to proof-of-stake.”
Additionally, MicroStrategy's Michael Saylor shared a few high level thoughts on Bitcoin Mining & the Environment...
1. Bitcoin Energy Utilization: Bitcoin runs on stranded, excess energy, generated at the edge of the grid, in places where there is no other demand, at times when no one else needs the electricity. Retail & commercial consumers of electricity in major population areas pay 5-10x more per kwH (10-20 cents per kwH) than bitcoin miners, who should be thought of as wholesale consumers of energy
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