Merger completed Ethereum opens a new era

The massive overhaul of Ethereum known as the “merger” has finally come to fruition. After years of development and delays, the core digital mechanics of the second-largest cryptocurrency by market capitalization moved to a more energy-efficient system.

Replacing one method of blockchain operation called Proof of Work (PoW) with another called Proof of Stake (PoS) is no small feat. Justin Drake, a researcher at the non-profit Ethereum Foundation, said before the merger took place that it would be like swapping a gasoline engine for an electric one while a car is going full speed on the highway.

The potential payoff from the merger is enormous. Ethereum should now consume around 99.9% less energy . It is estimated that, from an energy cost perspective, it would be like Finland suddenly shutting down its grid.

Ethereum developers say the merged upgrade will make the network more secure and scalable. The Ethereum network hosts a $60 billion ecosystem of Crypto exchanges, lending companies, NFT marketplaces, and other applications.

Ethereum has had the idea from the start that it will eventually move to proof-of-stake. But the transition is a complex technical endeavor—one so risky that many once doubted it would ever happen.

When the merge was officially activated at 2:43AM ET, more than 41,000 people watched the “Ethereum Mainnet Merge Viewing Party” on YouTube. They watched with bated breath as key metrics slowly came out, showing that Ethereum’s core systems weren’t breaking down. After about 15 minutes, the merger is officially complete, which means the merger can be declared successful.

The update, which ends the blockchain network’s reliance on an energy-intensive mining process, has been closely watched by Crypto investors, enthusiasts and skeptics for its expected impact on the wider blockchain industry.

Dallas Mavericks billionaire investor Mark Cuban said he would be “watching [the merger] with as much interest as anyone else,” noting that the merger could be deflationary for ethereum’s native token, ETH.

With a market cap of nearly $200 billion at the time of writing, ETH is the second-largest cryptocurrency after Bitcoin (BTC). Within minutes of the merger, ETH was quoted at $1,632, down about 0.4% in the previous 24 hours.

The update is also complicated by the fact that the merged upgrade could be one of the largest attempts at open source software in history, requiring the coordination of dozens of teams and dozens of independent researchers, developers and volunteers.

Tim Beiko, a developer at the Ethereum Foundation who played a key role in coordinating the update, said: “I think the merger could really get people who are interested in Ethereum but sceptical about its environmental impact to try it out. it.”

Goodbye PoW miners!

In 2008, Bitcoin introduced the world to the concept of a decentralized ledger — a single, immutable record of transactions that can be viewed, modified and trusted by computers around the world without the need for a middleman.

Launched in 2015, Ethereum expanded on the core concept of Bitcoin with the functionality of smart contracts — computer programs that use the Ethereum blockchain as a global supercomputer, recording data to its Ethereum network superior. This innovation is the fundamental element behind Decentralized Finance (DeFi) and NFTs, which have been the main catalysts for the recent boom in the Crypto space.

The merger does away with Ethereum’s proof-of-work (PoW) system. In a PoW system, miners compete to write transactions into their ledger and are rewarded for solving cryptographic puzzles.

Today, most Crypto mining takes place in “mining farms,” although it might be more appropriate to describe these mining farms as factories . Imagine a huge warehouse with rows of computers stacked on top of each other, like bookshelves in a university library—each computer is hot, desperately trying to mine cryptocurrency.

This mining system, pioneered by Bitcoin, is what causes Ethereum to consume so much energy and fuels the blockchain field’s reputation as an environmental threat.

Ben Edgington, head of product at Ethereum R&D firm ConsenSys, recalls: “A few months ago, my daughter and I were talking about NFTs. At the dinner table, I mentioned some NFT projects rather stupidly, and she yelled at me, ‘How are you doing? To heat up the ocean with this ridiculous thing? It’s scary. I can’t believe you’re making a living out of it.'”

Edgington, who started his career in climate science and ended up in Crypto, understood his daughter’s point of departure. “Rightly or wrongly, she subscribes to a very harmful environmental narrative (of ethereum mining),” he said. “I mean, it’s hard to peel off these inherent labels, which are estimated to be 1 million tonnes of [CO2] per week.”

Hello, PoS stakers!

Ethereum’s new system, Proof of Stake, does away with mining entirely.

Miners are replaced by validators who “stake” at least 32 ETH to an address on the Ethereum network, and the staked ETH cannot be bought or sold.

These staked ETH tokens are like lottery tickets: the more a validator stakes, the more likely its lottery ticket will be drawn, allowing it to write “blocks” of transactions to Ethereum’s digital ledger.

Ethereum introduced a proof-of-stake network called the Beacon Chain in 2020, but before the merger, the network was just a staging area for validators to prepare for the merger. Ethereum’s transition to proof-of-stake involves merging the beacon chain with the Ethereum main network.

According to Tim Beiko, the energy consumption of proof-of-stake is “very small in terms of environmental impact.”

“Proof of stake is like running an app on your MacBook,” he said. “It’s like running Slack, Google Chrome, or Netflix. Obviously, your MacBook needs power to run. But no one thinks about the environmental impact of running Slack, right?”

Edgington pointed to the environmental impact of the merger upgrade as the benefit that interests him most personally. “I’m very proud, you know, that I can look back and say that I played a role in removing a million tons of carbon from the atmosphere every week. It had a big impact on my family and others.”

new incentives

The Ethereum network is more easily understood as a “nation state” than a single open source software – it’s a living organism , when a group of computers speak the same language to each other, all following the same set of When the rules are in place, it will come together.

Ethereum’s new system introduces a new set of incentives for the people running these computers (nodes) to abide by the rules written to ensure that the ledger is free from any unnecessary tampering.

“Proof of Work (PoW) is a mechanism for turning physical resources into network security. If you want to make your network more secure, you need more physical resources.” “And in terms of Proof of Stake (PoS), What we do is convert financial resources into cybersecurity.”

Although Ethereum before the merger had thousands of miners running and securing its PoW network, the computers of just three mining pools accounted for most of the network’s hash rate (computing power). Hash rate is a measure of the collective computing power of all miners.

If several large mining companies on the Ethereum network colluded and amassed most of the network’s hash rate, they would be able to perform a so-called 51% attack, making it difficult or impossible for others to update the ledger.

In Proof of Stake (PoS), by contrast, the amount of ETH a person stakes — not the energy consumed — determines that person’s control over the blockchain network. Proponents of proof-of-stake say this makes the attack more expensive and self-defeating: As punishment for trying to disrupt the network, the attacker’s ETH stake can be slashed or reduced .

Not everyone buys the proof-of-stake hype. For example, there is no sign that Bitcoin will abandon proof-of-work (PoW) — which its proponents insist is still the more proven and secure system.

While control of the ethereum network will no longer be concentrated in the hands of a handful of publicly traded mining groups, critics insist that the old institutions of authority will only be replaced by new ones . Lido is a community-run collective of validators that controls over 30% of the collateral on the Ethereum PoS chain. Coinbase, Kraken and Binance — the three largest cryptocurrency exchanges — control another 30 percent of the network’s collateral.

Well-known Crypto miner Chandler Guo was skeptical of proof-of-stake, announcing before the merger that he would launch a fork of Ethereum’s old proof-of-work chain, running using the old mining-based mechanism.

Ethereum’s core developers often say that PoW forks are sideshows and scams, but Chandler Guo’s “ETHPOW” and other similar forks have gained some traction in certain corners of the Crypto community.

What’s next?

Ethereum co-founder Vitalik Buterin said: “ This (merger) is the first step in Ethereum’s great journey to become a very mature system, but there are still many steps to go .”

Ethereum’s relatively high fees and slow speeds are not addressed in this update, and they remain a hindrance to growing the user base, as they were once the environmental issues.

Buterin, ethereum’s most high-profile leader, has previously outlined a series of next steps for the network, including ” sharding ” — a method of decentralizing transactions across “chains of shards” (Shards) A way to help address slow network transaction times and high fees is like adding lanes to a highway.

This upgrade (i.e. sharding) was originally planned to accompany Ethereum’s transition to PoS, but given the success of third-party solutions (called ” Rollups “) in solving some of the same problems, it was prioritized over mergers after.

Rollups heralded a possible future for ethereum development where community solutions—rather than updates to ethereum’s core code—would play a major role in extending the capabilities of the ethereum blockchain.

For Buterin, the merger was just the beginning. “ To me, the merger just symbolizes the difference between early Ethereum and the Ethereum we’ve always wanted …he said on Thursday’s livestream. “So, let’s move on to building all the other parts of this ecosystem. , to make Ethereum what we want it to be . “

Posted by:CoinYuppie,Reprinted with attribution to:
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