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The current period cryptocurrency is experiencing is nothing short of historic. As prices fluctuate in what has been one of the most volatile times in the crypto market, technological innovations promise to pave the way for a new future of blockchain.
The Ethereum merge, that presently has a tentative launch date scheduled for the week of September 19, 2022, promises to offer technological innovations that will ensure the sustainability of the Ethereum network for years to come.
The Ethereum merge, hailed as the “most significant upgrade in the history of Ethereum,” is a series of upgrades to the network that will push the Ethereum vision towards a new future with more scalability, security, and sustainability. The existing execution layer used in Ethereum will be joined with a new proof-of-stake consensus layer, the Beacon Chain, thereby eliminating the need for Ethereum mining.
In a proof-of-stake system, users “stake” their coins as part of the verification process and earn rewards in exchange. It’s a system that is much easier to understand for general consumers due to its more straightforward process and far less extensive setup.
For an average consumer, the similarities of earning rewards for staking to earning interest on a savings account make the post-merge staking process far more attractive to participate in
The benefits of proof-of-stake
One of the primary benefits of a proof-of-stake verification mechanism over proof-of-work is that it is more accessible to the masses, making the system even more decentralized. A proof-of-work system involves a complex mathematical process dependent on high-cost, environmentally-costly computer equipment called graphics processing units (GPUs).
On the other hand, a proof-of-stake system requires little more than an internet connection to be effective.
Indeed, by eliminating the GPU “farms” currently being used to mine cryptocurrency, a proof-of-stake verification mechanism is paving the way for a much more environmentally-friendly system. Because of the enormous power drain that operating such a large number of computers takes, the carbon footprint of ETH mining has historically been massive.
Reducing this impact will allow the Ethereum network to be more sustainable in the long run, reducing its energy consumption by around 99.95%.
Furthermore, a proof-of-stake consensus mechanism offers significant benefits to the network regarding its security. Spawn camping attacks are common in proof-of-work systems but can have devastating consequences on the verification process and, therefore, everyone using the blockchain.
Proof-of-stake systems eliminate this vulnerability by eliminating the GPU targets, making it much more difficult and costly for hackers to enter the system, often to the point where it is no longer worth their time.
How the merge will affect the Ethereum network
For the average consumer, there won’t be much difference in the Ethereum network before and after the merge. While there are some benefits that they will notice, like slightly improved transaction speeds, most of the effects will be invisible or on the validator’s side. Consumers won’t have to worry about their assets moving over in the merge — no action needs to be taken, and their ETH holdings will be entirely undisturbed.
Although gas and transaction fees will largely stay the same after the merge, overhead costs can be expected to drop. That is because the new proof-of-stake network will not require using the expensive and costly-to-maintain GPUs used to mine ETH in the proof-of-work network.
Many miners have expressed concerns about their earning potential being reduced, but the switch will still allow validators to earn, albeit with much less upfront investment in the technology necessary to do so.
Additionally, some experts are even theorizing that the Ethereum merge could bring about a significant increase in the value of ETH. When the Ethereum merge was announced, the price of ETH spiked around 40% that weekend, representing one of the most significant growths in the asset’s value since the crypto market’s crash earlier this year.
Although it is a far cry from November 2021’s all-time high, the fact that there was such a positive response to the announcement suggests that there could be an equal — or perhaps even more positive — response once the merge is implemented this coming September.
The Ethereum merge has plenty of exciting implications for the future of the network. It not only opens the door for future technological innovations, but also aims to makes the platform more democratic and decentralized.
Now, investors big and small can stake their coins and earn rewards, whereas the previous mining system would require an extensive and environmentally-destructive investment in technology.