What is The Merge, and why is the crypto community obsessed with it?
If everything goes as planned, by September 19th, 2022, the Ethereum blockchain will cease to be a Proof-of-Stake network like Bitcoin, becoming a Proof-of-Stake blockchain network like Solana in a historic event now known as the Merge.
If none of these makes sense to you, I’ll try and break it down as best as I can.
Currently, the Ethereum block operates as a proof of work network. That is, it uses the proof of work consensus mechanism to validate block transactions.
But what is a consensus mechanism?
Recall that a blockchain is more or less an open database, that anyone can take a look at or sign up to as a node. As a node, such a person agrees to undertake the responsibility of validating the records on the blockchain. This maintains the integrity and security of the blockchain by ensuring that the blockchain remains decentralized and that a few bad actors do not cheat the system by recording fraudulent transactions.
To put it simply, a consensus mechanism is a standard agreed upon and used by nodes to validate all blockchain transactions.
Proof-of-Work vs Proof-of-Stake consensus mechanisms
They are the two most popular types of consensus mechanisms used by blockchains. In POW, nodes compete against each other in an attempt to be the first to solve a cryptographic puzzle. The successful node gets to validate the transactions in a given block, and in return, earns the reward.
In Proof-of-Stake, nodes do not compete against each other. Instead, they stake some funds for the chance to be selected at random to validate the transactions and earn the rewards.
Although the PoW system is popular, it has some downsides. It requires a large amount of energy to run the computers. This makes it unfriendly to the environment. Because it requires miners to compete against each other, this has resulted in the creation of mining farms, where miners pool resources required to solve the puzzle and get the rewards. This poses a threat to decentralization.
It is for this reason and more that the Ethereum blockchain is transitioning from proof of work to Proof-of-Stake. As a PoS network, Ethereum will become more energy efficient, secured and scalable.
The Merge transition process
The merge will not just happen in one fell swoop. It happened in 2 parts and is expected to be completed by September 19th.
The first part of the merge was the launch of the Beacon chain in December 2020. This is a separate Proof-of-Stake blockchain that is tested without interrupting the activity of the current Proof of Work blockchain or Ethereum mainnet.
The merge is the second phase of the transition, where the Beacon chain will be merged with the existing mainet.
Picture this, you own a gas engine vehicle, and you need to change it to an electric vehicle without stopping the car. The Ethereum proof-of-work mainet is akin to your current gas engine, while the electric engine is the Beacon chain Proof-of-Stake engine. To transition from proof of work to Proof-of-Stake, you need to switch from the gas engine to the electric engine without stopping.
What happens after the merge?
After Ethereum becomes a PoS network, it will become more sustainable and eco-friendly. Its power consumption will be reduced by 99.95%
The PoW mainet will cease to exist
With more PoS validators, the network will become secured
In conclusion
The merge is the process of merging the existing Ethereum proof of work mainet to the Proof-of-Stake Beacon chain. It is a big deal because it is the first blockchain to undergo this significant transition, considering the fact that Ethereum is the second largest blockchain in the world and currently supports most of the existing DeFi protocols. For a long time coming, we will not stop talking about this truly historic feat.
