Inarguably, Ethereum is the world’s second-biggest blockchain that produces ether cryptocurrency and serves as the platform for building most NFTs too. However, these blockchains emit carbon dioxide and also consumed enormous energy. Thus, in a world where climatic change mitigation is a priority concern the “Ethereum Merge” is probably the most sorted solution which everyone is eagerly waiting to happen. It is believed that the success of the Merge will lower the Ethereum massive electricity requirements by 99% which indicates a considerable impact on the working of the Web 3 ecosystem.
What is Ethereum Merge?
Ethereum Merge is a network update where the major act would be the transition of Ethereum from Proof-of-Work (PoW) to a Proof-of-stake (PoS) consensus mechanism. As mentioned this transition is aimed at reducing the energy costs associated with Ethereum transactions by 99%. Thus, this switch means the complete movement of Ethereum blockchain to PoS validators’ nodes or Beacon chain that requires staking or locking up essentially.
Alongside, this transition will also remove the need for mining nodes that are used to compete for block rewards. Instead will then require node operators to stake 32 Ether (ETH) as collateral to be eligible for being network validators and earn rewards.
What motivated the Ethereum Merge to happen?
There are certain motives behind planning the blockchain transition to the PoS consensus mechanism besides lowering the energy consumption by 99%. This transition will lower the hardware requirement for node operators and make the complete Ethereum ecosystem more decentralized. Furthermore, it will enhance its ability to provide scalable solutions for activities like sharding. Alongside, the client diversity of the Merge will also enhance security in the blockchain and possibly the transaction confirmation might speed up too.
This complete process is predicted to make ETH a more deflationary asset. Presently, there are approximately 13,000 Ether mined each day, which will drop to 1600 Ether rewards each day after the merge. This indicates a 90% reduction in the issuance of Ethereum as block rewards and will lower the inflationary growth of the ETH too.
Why is it termed “The Merge”?
Usually, it’s the “mainnet” Ethereum blockchain that people use, however, this is different from the one used only by developers i.e. “testnet” blockchains. In 2020, when Ethereum created the new network called “Beacon chain,” it became the new Ethereum. However, Beacon Chain, which is a PoS chain, still stands isolated since its launch. Thus, through Ethereum Merge, these two distinct blockchains will come together and shape a better Ethereum network. Since the transition of Ethereum from POW to PoS is a result of the merging of two blockchains, therefore it is termed “Merge”.
What can be the impact of Merge on the price of Ether (ETH)?
Since Ether is running low since the beginning of the year, it is expected that this event would revive its price as the most profound and precision would be added to the complete Ethereum network which in turn can create the growth market for the same. The cost, energy, and complexity associated with the existing Ethereum network would be solved at once Secondly, the idea of Merge is focused on fractioning its carbon footprint that is massive with the existing blockchain network. Thus, the ESG (Environmental, Social, and Governance) plans of Ethereum can boost the idea of ethical investing. Thus, experts see Merge as a positive event for the Ether market.
This phenomenal event is scheduled to take place on September 15, 2022, and the industry has immense expectations from the merging of these different Ethereum networks. Thus, Merge is certainly seen as the game-changer for the complete Web 3 ecosystem. Are you ready to see what it offers?
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