Everyone in the crypto industry knows that Ethereum is the second biggest cryptocurrency offering one of the widest used crypto networks facilitating countless other altcoins. As of the time of writing, the Ethereum blockchain works on the proof-of-work consensus mechanism, and the Ethereum merge will replace this mechanism to make the whole network sustainable and scalable. Not only that, due to being the second largest crypto blockchain, Ethereum emits a massive proportion of carbon affecting the whole environment, which is enormously dangerous for the whole ecosystem.
In order to solve the problems like these, the Ethereum merge is being brought about by the developers, which could bring a revolutionary change in the entire system that has been up and running for years now. In order to understand what exactly the Ethereum merge intends to bring and what its advantages and disadvantages might be, keep on reading this article.
- The Ethereum network is currently on the proof-of-work mechanism which consumes large amounts of energy
- The Etherem Merge will replace this with the proof-of-stake mechanism, which is more sustainable and environmentally friendly
- The date of the Ethereum merge is Sep 15, 2022
- ETH 2.0 refers to the new blockchain system, and is NOT a new cryptocurrency
- Do not fall for scams where people sell ETH 2.0 as a separate crypto asset
- There are some risks with the merge, as described here
What exactly is the Ethereum merge, and what does it intend to do?
For you to understand precisely what the Ethereum merge is, you first have to understand how the Ethereum network works. In the simplest words possible, the Ethereum network is currently using the proof-of-work mechanism that requires miners to solve mathematical equations or entries before any block can be added to the blockchain. The mining process requires powerful hardware that can process the mathematical equations faster and validate the entries efficiently.
That is where the problem comes in. When such powerful hardware is used to run the second biggest crypto blockchain network, a massive amount of electricity is used, resulting in carbon emissions. And carbon emission is a lot more dangerous to our environment than you might think.
In order to counter this problem, the Ethereum merge has been planned for quite some time now, and it will also solve a few more problems that we will discuss later.
What will happen in the Ethereum merge?
One of the primary things that will happen in the Ethereum merge is that the current proof-of-work consensus mechanism will be replaced by a proof-of-stake mechanism. The proof-of-stake mechanism is far more efficient and reliable than the proof-of-work system due to the fact that it does not require hardware power for mining and validating the blocks. Now, the node operators will only have to stake ETH on the network as collateral and become the network validators. Do remember that the proof-of-stake mechanism has been in the works for over seven years now due to the complexities involved and the investment required. It has also been said that this mechanism has been in consideration even before the creation of ETH, but its proper execution was not possible at that time.
Replacing it with the previous mechanism is certainly a challenging task, but if everything goes smoothly, we might see Ethereum being adapted by many in the coming years.
Is ETH actually bad for the environment?
You might be thinking here if ETH really is bad for the environment or if it is just an agenda being run by the banking and finance industry, which doesn't want the crypto industry to prosper. Well, to burst the bubble here, ETH in its current state is bad for the environment. Not only ETH, but every single cryptocurrency that uses the proof-of-work mechanism is slowly damaging the environment and can bring tons of consequences in the near future.
There are thousands of miners mining every day to validate the block and earn the rewards. Every single one of those miners either uses a powerful PC, a mining rig, or specialized mining machines that consume enormous amounts of electricity in order to work. That consumption of electricity is what emits carbon and damages the environment.
How worrisome is the crypto electricity consumption?
We all use many appliances in our everyday lives that consume electricity, so what’s the big deal if electricity is being consumed by mining rigs? To give you some context, there are millions of mining machines running all over the world, and each of them consumes a lot more electricity than a simple appliance does.
Some reports even claim that mining rigs from all over the world consume more electricity than the whole of Argentina, or the carbon emission by those rigs is equal to what the whole of Singapore emits. These numbers should be able to give you an idea of how big of a problem they pose.
How will validators earn money with the Ethereum network now?
Previously, validators or miners earned money by being rewarded for the proportion of a single block they had mined . So what will happen after the merge? Will the validators be able to earn money at all? The answer is obviously yes, but the scenario will be changed a little.
Instead of receiving rewards for mining, you will be rewarded for simply staking your ETH on the network. Do note that in order to become a node validator, you must stake 32 ETH. If you cannot stake 32 ETH, you can simply join a staking pool and contribute your ETH with others to earn money.
What is the fuss about ETH 2.0 and Beacon chain?
If you have been trying to understand what the Ethereum merge is and how it is going to happen, then you might have come across the terms ETH 2.0 and Beacon chain. Neither of these terms are new; we have just been referring to them with different names.
ETH 2.0 simply refers to the new blockchain system that is going to be implemented. So no, ETH 2.0 is not going to be a separate cryptocurrency; never fall for any scams claiming to sell ETH 2.0. As for Beacon chain, it is the proof-of-stake consensus mechanism that is being used in the ETH merge to make it efficient.
Will the Ethereum merge affect the asset’s price?
Here is the million-dollar question that no one knows the answer to. There is a high chance the price of ETH will be affected by the Ethereum merge, but no one knows if it will go high or low. The only option here for you is to do your own research, evaluate the situation, consider all possibilities, and then decide for yourself if you should buy or sell ETH.
What we do know, is that ETH 2.0 has been in the works for many years now, and there may be big investors willing to invest in the new project. Yes, the price may skyrocket, but who knows, as we are talking about cryptocurrencies - the most volatile asset class around.
What are the risks of the Ethereum merge?
The Ethereum merge might seem like a revolutionary solution for all the problems the network is causing, but there are some risks involved. Some of the most crucial ones are mentioned below, and you should take a look at them to see what you should be wary of.
Crashes and bugs
One of the major problems that we might see with the Ethereum merge is bugs and crashes. These types of issues will certainly make it hard for transactions to be processed. It will affect not only individuals but whole organizations that now rely on the Ethereum network. There will be a risk of halting some businesses or any other activity related to the Ethereum network for some time, in order to get everything fixed.
Inclusion of centralized entities and governance
This can be quite a troublesome aspect to deal with, and no one who appreciates the concept behind cryptocurrencies would approve of that. Due to the new proof-of-stake mechanism, most validators would want to join staking pools because it is very unlikely for them to have 32 ETH which is required to become the sole validator. This will encourage them to find suitable ETH pools and go with centralized entities and let the third-party governance take over their funds.
Scams and misunderstanding
Countless people including experienced crypto geeks have been confusing ETH 2.0 with a separate cryptocurrency, which is certainly not the case. ETH 2.0 is just a reference to the new mechanism the whole Ethereum network will be following and nothing else. But due to this confusion, scams have risen quite recently in the form of assets named ETH 2.0. Many people have even fallen for those scams by buying those tokens thinking they have invested in the new ETH cryptocurrency.
When will the Ethereum merge happen?
The Ethereum merge is expected to happen on the 15th of September, 2022. If you do a quick search on Google of “Ethereum merge,” a snippet will pop up with the exact time of the merge. It will be based on the current difficulty, network difficulty, and hash rate.
It is applaudable that the Ethereum network took this step for the betterment of the environment. The upcoming mechanism of the Ethereum network is unquestionably more sustainable and can benefit the whole blockchain industry. Let’s hope for the best and see how things turn out when the Ethereum merge happens.
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