Ethereums long-awaited switch to using less energy is here

The major issue with mining crypto is the amount of energy required to verify transactions on blockchains that require proof of work. Ethereum decided to shift from the energy-intensive proof-of-work to the more environmentally friendly proof-of-stake system. The Ethereum Foundation has claimed that the transition reduced Ethereum’s energy consumption by 99.95%. After the merge, you’ll eventually be able to run smart contracts on mainnet Ethereum using proof of stake rather than proof of work. You’ll have to wait for yet another post-merge upgrade, which the Ethereum Foundation—the organization that oversees the development of the Ethereum blockchain—expects will happen “very soon” after the merge. In July 2022, Chinese Ethereum miner Chandler Guo started a campaign opposing the merge, saying it would cause job losses for Ethereum miners.

Why is Ethereum Switching Now

Sign up for Valid Points, our weekly newsletter breaking down Ethereum’s evolution and its impact on crypto markets. It was no small feat swapping out one way of running a blockchain, known as proof-of-work, for another, called proof-of-stake. “The metaphor that I use is this idea of switching out an engine from a running car,” said Justin Drake, a researcher at the non-profit Ethereum Foundation who spoke to CoinDesk before the Merge happened.

The White House administration has gone as far as to float the idea of exploring possible options to limit energy-intensive mining, like bitcoin, if the process doesn’t become greener. Ethereum is the second largest form of cryptocurrency based on market cap, trailing only bitcoin. So when something happens to ethereum, it impacts the entire cryptocurrency space. The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

What comes after the merge?

Many developers will now focus on rollup contracts to reduce transaction costs and enable scalability. Those who don’t own 32 Ether or don’t wish to run a validator node but wish to stake Ether can still do so by joining a staking pool. A staking pool combines the deposits of multiple individuals to stake the required 32 ETH for an Ethereum validator node. The block rewards from that node are then shared with the staking pool in proportion to the deposited ETH per individual account.

  • Requiring resource-heavy computing processes to try to mess around with the ledger disincentivizes people from doing so.
  • Due to Ethereum’s move to PoS regulators will not be able to use this argument against the blockchain.
  • To pull off a switch of this magnitude, engineers have been conducting dress rehearsals for the merge in recent months involving several Ethereum test networks to look for bugs or hiccups in the transition process.
  • “ETH 2” simply refers to the new PoS blockchain that will go live as Ethereum’s main blockchain network after the merge.

One of the sub-industries of the crypto sector that has suffered the most from the burden of using unsustainable technology is the NFT sector and its derivatives. Regulating cryptocurrencies is not a simple task, due to the great versatility between projects. Sustainability concerns seem to have been the argument chosen to exercise regulation over cryptocurrencies. Likewise, Ibanez believes that the merge and its aftermath, both immediate and long-term, will reveal a great deal about what the Ethereum community wants Web3 to look like as it moves forward. Due to the confusion, a good rule of thumb is to be wary of anyone telling you that you’ve got unspent ETH or other assets just sitting on the other chain and offering to liquidate it for you. There are other cryptocurrencies that use the PoS system but none of them operate at the scale of Ethereum.

The merge itself won’t resolve high gas prices, however—it just sets the stage for a set of upgrades that will eventually cut costs. These upgrades used to be known as Ethereum 2.0, but that terminology was scrapped in early 2022. That upgrade was initially slated to accompany the transition to proof-of-stake, but it was deprioritized given the success that third-party solutions – called rollups – have had in solving some of the same issues. This system, which was pioneered by Bitcoin, is what caused Ethereum to guzzle so much energy and is responsible for fueling the blockchain sector’s reputation as an environmental menace.

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S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. “Any funds held in your wallet before the merge will still be accessible after the merge. To Ethereum core developer Tim Beiko, the biggest misconception about the merge is that you need 32 Ether to run a node, he told Ethereum Proof of Stake Model Fortune. “Thirty-two Ether is only needed to run a validator,” as mentioned earlier. The large positions of Lido and others reflect the fact they are custodians for thousands of smaller Ether holders—and don’t actually own most of what they hold—but the centralization fears persist nonetheless.

Why is Ethereum Switching Now

“Blockchain by design is just never going to be super-efficient technology,” he said. The switch to PoS is “a step in the right direction on sustainability,” Alex de Vries, an economist who runs the Digiconomist website, told Euronews Next. The PoW system works like a competitive numeric guessing game and the first person to solve the puzzle is awarded a fixed amount of cryptocurrency. “And we finalized!… Happy merge all. This is a big moment for the Ethereum ecosystem,” he said in a tweet.

Ethereum Merge and Bitcoin

This year, Ether prices have been depressed ever since the Federal Reserve announced its intention to institute a series of aggressive interest rate hikes in order to combat inflation. High interest rates dissuade consumers from investing in more risky assets, which includes crypto. Agreeing to stash away ether in exchange could come back to haunt the validators, too, especially if the price of ether falls dramatically and someone wants to sell, Daugherty said. Moving to a proof-of-stake system will likely create haves and have-nots among the validators and everyone else who uses ethereum, said Bryan Daugherty, the global public policy director for BSV Blockchain Association. The Merge officially launched on Thursday and, so far, it has had no discernible impact on the value of popular cryptocurrencies. Both bitcoin and ether were down more than 1% hours after the upgrade went live.

There are solutions being worked on to make the proposer selection anonymous, but this is currently still a risk. The Ethereum Merge is the joining of Ethereum’s proof-of-stake Beacon Chain with the Ethereum Mainnet to transition the Ethereum blockchain off the legacy proof-of-work system. As of mid-September 2022, Ethereum has officially switched over to a PoS model. This will result in a 99.95% reduction in Ethereum’s energy consumption and the ability to further scale the Ethereum ecosystem.

Why is Ethereum Switching Now

Ethereum’s transition to proof-of-stake involved merging the Beacon Chain with Ethereum’s main network. Previously, the Ethereum blockchain relied on proof-of-work, a consensus mechanism that requires a lot of computational effort from all the decentralized nodes participating in the blockchain. Algorand is a cryptocurrency and blockchain platform that can finalize transactions immediately. The Ethereum Merge is a network update to transition Ethereum from proof of work to a proof-of-stake consensus mechanism.

Ethereum Merge: What To Expect and How To Prepare

Once the merge is complete, the Ethereum mainnet will shift away from proof of work and instead adopt the Beacon Chain’s proof-of-stake mechanism. Miners aren’t too happy that one of the biggest cryptocurrencies, Ethereum, is switching off its rigs. Bunsen said that prior to Wednesday, the beacon chain wasn’t actually doing much.

A 51% attack is an attack on a blockchain by a group of miners who control more than 50% of the network’s mining hash rate, or computing power. There’s also the possibility that switching to proof-of-stake validation could mean that ETH is easier to classify as a security. The Securities and Exchange Commission and Web3 entities in the U.S. have a tenuous relationship, to say the least. The prospect of the second-largest cryptocurrency in existence attracting the SEC’s ire isn’t something about which anyone should be particularly excited.

To do so, blockchain has conventionally relied on the Proof of Work system. Developers have conducted as well 10 mainnet “shadow forks” where they ran through the merge using a small number of nodes. This proved helpful since the shadow fork process is minimal enough to not disrupt the mainnet, but useful enough to assess any potential issues prior to the big mainnet merge. As developers continue to prepare for the merge, they’re planning still more shadow forks.

And that, in turn, means the entire rebel ecosystem will come into existence in a slow-motion collapse, as forked projects fail one by one. But it will still provide a base for new creation, and one that is ultimately more similar to the ethereum developers know and love than the environmentally friendly version it is about to morph into. Department of the Treasury’s Request for Comment on the Responsible Development of Digital AssetsIn this letter to the U.S. That’s because the ethereum merge could speed up processing and offer greater security and stability, and a 98% or greater reduction in Ethereum’s energy consumption,Hashoshisaid.


Also in every slot, a committee of validators is randomly chosen, whose votes are used to determine the validity of the block being proposed. Wednesday’s exercise showed that the proof-of-stake validation process substantially reduces the energy necessary for verifying a block of transactions, and also proved that the merger process works. Ethereum’s longest-lived test network simulated a process identical to what the main network will execute this fall. Testnets allow developers to try out new things before they’re rolled out on the main blockchain, giving them time to make necessary tweaks.

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The Ethereum Foundation figures the switch will reduce energy costs by more than 99 percent. The Merge has been repeatedly delayed since 2017, leading to jokes that it’s vaporware. The Ethereum Foundation noted that the need for scaling through shard chains has been offset somewhat by layer-2 scaling solutions, like Optimism and Arbitrum. Everyone who helped make the merge happen should feel very proud today. Rollups foreshadow the likely future for Ethereum development, where community solutions – rather than updates to Ethereum’s core code – play the primary role in expanding the chain’s capabilities. He went on to mention Ethereum’s relatively high fees and slow speeds, which were not addressed by the update, but remain as much a barrier to growing the network’s user base as environmental concerns ever was.

Why Solana (SOL) Price Might Have Further to Fall

One popular miner has said he’ll “hard fork” the network, splitting off the code to preserve a separate chain . That move isn’t likely to have a large impact on the ecosystem unless the big platforms recognize it; OpenSea, the largest marketplace for NFTs, has claimed it will only support proof-of-stake Ethereum. The proof-of-stake mechanism radically changes how the Ethereum blockchain works.

But having both versions running gave hackers twice as many entry points to potentially attack ethereum. Using proof-of-stake, the Merge is projected to reduce ethereum blockchain’s energy consumption by 99.9%, developers said. The merge switched the mainnet version of Ethereum—the part that supports transactions and smart contracts—to be part of the beacon chain. Following the merge, the proof-of-work part of Ethereum will fall away, and mining will be gone forever. Proof of stake, on the other hand, requires “validators” to put up a stake—a cache of ether tokens in this case—for a chance to be chosen to approve transactions and earn a small reward. The more a validator stakes, the greater the chance of winning the reward.

What is the Merge?

This staked ETH then acts as collateral that can be destroyed if the validator behaves dishonestly or lazily. The validator is then responsible for checking that new blocks propagated over the network are valid and occasionally creating and propagating new blocks themselves. Once Ethereum shifts to a proof-of-stake consensus mechanism post-merge, the network will rely on trusted entities known as validators to verify transactions and add new blocks to the blockchain.