The Ethereum ‘Merge’ And How It Will Alter The Way Crypto Works
Chances are you’ve heard about Ethereum’s big ‘merge’ by now, but do you know what it means for the future of cryptocurrency? While many are excited by the idea of Ethereum merging and moving to a Proof-of-stake system, others are skeptical about the security or success of the move.
Because of how huge Ethereum is, and how much of the rest of the industry its actions have an effect on, it’s going to change up a lot in the crypto world whether it’s wanted or not.
The merge will also inevitably have a huge effect on miners who will no longer be able to mine Ether and will have to decide whether they want to get into staking or abandon Ether altogether.
What Exactly Is ‘The Merge’?
The merge is the name given to an event that many enthusiasts believe will change the face of cryptocurrency forever. What is now called the merge has been called Ethereum 2.0, Eth2, and ETH 2.0, but all these refer to the same thing.
The merge is essentially an Ethereum upgrade meant to improve the cryptocurrency’s network, similar to the upgrades many crypto projects receive from time to time. What makes the merge different is the impact it’s expected to have on the industry as a whole..
If it’s successful, it should be a monumental upgrade, the likes of which have not been seen in crypto to date. Ethereum plans to merge together the main Ethereum blockchain used by the public, with something called the Beacon Chain.
Whereas the current blockchain relies on proof of work, the Beacon Chain instead uses something called proof-of-stake.
So, What’s The Difference Between Proof Of Work And Proof-Of-Stake?
Proof of work (PoW) is a decentralized consensus mechanism that needs users to solve math problems in an attempt to deter people from hacking or otherwise messing with the blockchain.
PoW is widely used in cryptocurrency and token mining, as well as during peer-to-peer transactions. PoW actually makes it safe and secure to conduct crypto transactions without the need for a third party to be present, making it extremely popular.
Proof-of-Stake (PoS) on the other hand, is another type of consensus mechanism that doesn’t require as much work as PoW. Instead of having to solve complex mathematical puzzles, users validate transactions based on the number of coins they stake.
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Whereas PoW requires a lot of tedious work of its users, PoS simply needs validators to have and stake coins. While both of these methods have their pros and cons, Ethereum believes that PoS is less risky than PoW because of the way its compensation is structured. While some may agree, others are skeptical.
How Will Ethereum’s Proof-of-Stake Work?
According to Fortune , Ethereum’s PoS system will choose a new validator completely at random about every 12 seconds. It will be this validator’s job to verify transactions as well as contribute new blocks to the blockchain.
Anyone willing to deposit 32 Ethereum ($61k as of August), can apply to be a validator. That 32 Ethereum is intended to weed out people with malicious intent from those who hold a significant stake in the success of the currency, and presumably can therefore be trusted with the responsibility.
While it’s highly unlikely someone willing to put that much money into applying to be a validator will then go and mess with their own investment, it’s still possible.
Validators will be compensated for their work in the form of Ether, and those that abuse their power will be penalized in the form of losing some or all of their deposit.
As of right now, the Beacon Chain has over 415,000 validators, some of which will surely begin validating Ethereum when the merge happens.
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