August 22, 2022
Mining on the blockchain is a notorious energy hog and bad for the environment. Ethereum is on the verge of a big change aimed at substantially reducing its carbon footprint. After seven years of using the traditional proof-of-work mining technique, Ethereum is switching to the more efficient proof-of-stake method that is expected to reduce energy consumption by 99.5 percent. That change, known as The Merge, is scheduled to take place September 14. The Merge will see Ethereum’s proof-of-work blockchain fused with the proof-of-stake Beacon Chain, which launched in December 2020 but has yet to process its first transaction.
Ethereum Foundation researcher Justin Drake tells Wired the process is comparable to switching a car from an internal combustion engine to an electric one: “Step one: We install an electric engine in parallel to the gasoline engine. And then — step two — we connect the wheels to the electric engine and turn off the gasoline engine. That’s exactly what’s going to be happening at The Merge.”
The transition has been in the works for some time, with Ethereum sitting on “this parallel engine of the Beacon Chain for a year and a half,” but now Wired writes that it appears “the long-awaited shift will finally happen, following a successful dry run carried out on a test blockchain, called the Goerli chain, on August 10.”
At its most basic, “proof-of-stake is predicated on the idea of securing a network through incentives rather than hardware,” reports Wired, explaining “you don’t need an expensive mining computer to partake in the network: You can use your laptop to put down a ‘stake’ — a certain amount of cryptocurrency locked in the network. That gives you the chance of being selected, usually via a random process, to validate a certain block and earn crypto rewards and fees.”
While Bitcoin is mainly about payments, according to Wired, Ethereum facilitates “the creation of blockchain-based applications and so-called smart contracts, which are self-enforcing subroutines powered by ether tokens.”
Following The Merge, an important Ethereum addition will be a process called sharding, “which will segment the network into many parallel chains, expanding it from its current capacity of about 30 transactions per second” to what is expected to be around 100,000 transactions per second with lower transaction fees, says Wired.
In a lengthy and detailed explication, Fortune reports The Merge is significant because “Ethereum is the most-used blockchain and powers Ether, the second-largest cryptocurrency, with a $202 billion market cap.”
“Ethereum also hosts numerous decentralized applications (dApps) and decentralized finance (DeFi) protocols and establishes the authenticity of millions of non-fungible tokens (NFTs).” Thus the “ripple effect” of The Merge on the broader crypto industry is expected to be significant.
What Ethereum’s Big ‘Merge’ Means in Crypto Land, The Wall Street Journal, 8/20/22
Crypto Ads Starring Matt Damon, Tom Brady Vanish from Television, Bloomberg, 8/17/22