Ethereum, the second-largest blockchain in the world by market capitalisation, underwent a massive network update on September 15, 2022, which completely transitions it to a proof-of-stake (PoS) consensus algorithm from the current proof-of-work (PoW).
The upgrade, called 'The Merge', merges Ethereum Mainnet with the Beacon Chain, making the cryptocurrency greener, more efficient and much more appealing to investors.
Mainnet is the primary public Ethereum production blockchain, where actual-value transactions occur on the distributed ledger.
The Beacon Chain is the PoS coordination mechanism of the new network, responsible for creating new blocks, making sure those new blocks are valid, and rewarding validators with Ethereum for keeping the network secure.
The Merge represents one of the most significant moments in the crypto journey and offers a big opportunity to make profits.
What is The Merge?
The Merge, as used in the context of blockchain technology, is an upgrade that propagates every block in a chain to network nodes.
In the case of Ethereum, already being used by Fortune 500 companies to power their blockchain applications, the merging will apply all the outstanding code upgrades that have already been done to the network's present codebase.
What are PoW and PoS?
Under PoW, Ethereum miners validate transactions by using the computing power of computers to solve very difficult mathematical puzzles.
A PoS allows coin holders to ‘stake’ their coins, in return for validation privileges and potential yield rewards.
In crypto parlance, staking involves "locking up" a portion of your cryptocurrency for a period of time as a way of contributing to a blockchain network.
How does the current mechanism work?
At the moment, the PoW consensus mechanism powers the Ethereum blockchain.
The Bitcoin network employs a consensus mechanism similar to this.
However, Ethereum introduced the Beacon Chain in 2020, side-by-side with the Ethereum Mainnet.
The Beacon Chain, which has not handled any transactions for the last two years, will start doing so as it merges with the Ethereum Mainnet.
What makes The Merge so important?
The Ethereum merging is essential to expand the network and enable it to manage the growth in daily transaction volumes.
The rising volume of traffic through the network along with the number of users and apps has necessitated additional processing capacity to complete each transaction.
There are already more than three million transactions every day on the Ethereum network and as more users and companies use the system, this figure is likely to rise.
However, it is challenging to scale up to fulfill the increasing demand because of the limits of the network's present design.
With the upgrade, developers will be able to increase scalability and performance without having to start from scratch by introducing a new architecture as part of the impending merge.
As the user base expands over the ensuing years, this will enable the network to develop steadily, going forward.
How Ethereum Merge will operate
The Merge will incorporate all pending updates to the Ethereum network's code.
Updates to the primary smart contract programming language, the virtual machine that executes smart contracts, the data persistence storage system, and various other network infrastructure parts will all be included in this.
The new unified codebase will then be broadcast over the network so that all nodes are updated to the new codebase simultaneously.
Each of these components will have to be updated separately to verify that they are compatible with the new codebase.
What are the benefits of The Merge?
Security and efficiency - The merger will make it simpler for software engineers to adopt new modifications with less danger of unanticipated side effects, helping to make the system more safer and secure.
Additionally, it will speed up the network's processing of transactions and give end users who are worried about the security of their digital assets more peace of mind.
Greater flexibility for future development - The merged code will provide the network with additional options for how it can handle more users and transactions.
It will also ease some of the network's present scalability constraints, enabling it to grow much faster in the ensuing years.
Reduction in gas (transaction) costs - The unified code will lead to quicker, less expensive transactions since the system's fundamental architecture will become more efficient.
Users won't have to pay exorbitant transaction fees anymore for simple financial activities like buying and selling cryptocurrencies.
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| 1W returns-3.39% |
| 1W returns-6.77% |
| 1W returns-7.09% |
| 1W returns-8.23% |
| 1W returns-9.96% |
| 1W returns-14.64% |
| 1W returns-16.03% |
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