The Ethereum Merge is just around the corner. The main highlights include Ethereum changing its Proof-of-Work (PoW) consensus mechanism to a much more environmentally friendly one, the Proof of Stake (PoS) consensus mechanism.
Ethereum developers are going from high-energy consumption to a less energy-consuming model. The company aims to reduce its energy consumption by 99.95% with the new merge. This merge has been the talk of the town for a couple of weeks now but still, many people are confused about what to expect and why the merge is happening in the first place.
So, to answer all the questions, let’s take a deep dive into the Ethereum merge.
Why Is The Merge Happening?
According to the Ethereum Foundation, “The community has built a new engine and a hardened hull. After significant testing, it's almost time to hot-swap the new engine for the old mid-flight. This will merge the new, more efficient engine into the existing ship.”
But what was wrong with the previous system that Ethereum was using? Well, the old system or “engine” used the PoW system to add new transactions on the mainnet. And the PoW system requires computers to solve complex equations before they go on and add a new block. It is also known as mining. Even though mining is very efficient, it also uses a lot of resources and is not environmentally-friendly. You can expect the old Ethereum system to consume as much power as an entire country.
Moving on to the Proof of Stake (PoS) system, it takes fewer resources and electricity. So if a user wants to be a part of the verification process, he or she will have to use their cryptocurrency through a process called crypto staking.
This not only uses fewer resources but also saves the planet. Now we know why the merge is happening, so let’s move on to the Ethereum merge timelines. When is the merge happening?
What Will Happen To Ethereum’s Supply?
Although its yearly supply is capped, there is no limit to the number of Ethereum that can be mined over time. This may change after the merge. The upgrade is likely to decrease the supply, so token holders will have a lucrative opportunity staking. It will be a huge boost to Ethereum's investment potential and as a store of value.
How Will The Merge Affect Ethereum Miners - What Will Change?
Sharding Will Be Available
Sharding is the process that divides the validation work of a network into smaller parts. This way, Ethereum will be able to hold a lot more transactions on its network. It not only increases participants on the network but also lets Ethereum be run on phones and other smaller devices.
Even though Sharding itself is not exactly part of this merge, it is still the talk of the town for Ethereum’s future updates.
Mining Will Cease
As the Proof of Stake system takes over, it wouldn’t be possible to initiate transactions and verify them on the mainnet with mining. However, the validators on the Beacon chain will have to confirm all the new transactions.
Hence, the overall new coin circulation will decrease to around 90% because mining rewards will stop. Mining rewards account for a significant portion of total transaction volume, and Ethereum needed to make this change to reduce energy consumption.
So this is a bit hard for miners since they won’t be able to mine any more Ethereum by using the regular mining process.
What Won’t Change?
Transaction Speed and Gas Fees
Even after the merge, the gas fees won’t be lowered or the transaction speed won’t get higher. This is according to the official Ethereum website and the merge report.
What are People’s Sentiments Towards The Merge?
A lot of people are unhappy with the merge, because it still doesn’t reduce gas fees or transaction speed. Also, Ethereum mining has become quite lucrative over the years, so stopping the regular mining process will leave a lot of individual miners out in the cold.
The main benefit of the merge will be that it will significantly improve the efficiency of the Ethereum blockchain, creating more opportunities for decentralized use cases. Already, Ethereum’s blockchain has been used to create multiple Dapps that have generated millions of dollars for users and investors alike. After the merge, we will see a lot more innovations.
The Merge is set to start on September 6, and with a series of small updates, Ethereum will complete its merge stage to move on to the next evolution. The intentions seem environmentally friendly, and since less energy will be used, more and more people will start to actively invest in the platform and potentially gain profit from Ethereum.