Proof of Stake ETH: The Merge Explained
‘The Merge’ is the name of the event when the Ethereum blockchain changes from using Proof-of-Work (PoW) to Proof-of-Stake (PoS).
In the PoW model, the network is secured by miners who purchase mining hardware and consume electricity in exchange for block issuance and a portion of transaction fees.
In the PoS model, the network is secured by validators who have to stake ETH in order to validate the network. The validators don't consume much electricity in this model.
The transition is to make Ethereum more energy-efficient, and more secure and lays the groundwork to enable scaling with sharding in the future.
It was one of the big milestones in the Ethereum roadmap, with research starting even before the Ethereum network launched. The Ethereum developers split this into 2 with the first part being the launch of the PoS Beacon Chain, which launched in December 2020. This created a chain that could be tested in production for some time without having a direct impact on the already existing Proof of Work network. There are no transactions, tokens, or Defi apps on the beacon chain.
The Merge is the second part, which will merge two independent blockchains that are currently running in parallel, i.e. the PoS Beacon Chain and the EVM state of the Ethereum PoW chain.
When is the Merge?
The Terminal Total Difficulty (TTD) value triggering The Merge is 58750000000000000000000, expected between Sept 14–15, 2022. Once the execution layer reaches or exceeds the TTD, the subsequent block will be produced by a Beacon Chain validator. The Merge transition is considered complete once the Beacon Chain finalizes this block. Under normal network conditions, this will happen ~13 minutes after the first post-TTD block is produced! Once these two chains are merged, Ethereum’s PoW validation will be replaced by a brand new PoS consensus mechanism.
The Triple Halving
After the merge, the PoW network will cease to exist, dramatically reducing ETH issuance. Combined with EIP 1559, it would reduce selling pressure by 90%. This was dubbed the triple halving as the issuance drop is similar to 3 Bitcoin issuance halvings. Boolish?!
Forked PoW token?
Another major factor surrounding this is the hard fork. The majority of ETH miners are in favor of a hard fork to keep the PoW chain alive and continue mining. In the case of a hard fork, ETH holders would also receive an airdrop of the forked token.
Will this be a “buy the rumor and sell the news” kind of event? And what does this hold in store for the larger crypto community, as well as other coins on the Ethereum chain? We will explore these and more concerning this milestone in the next couple of weeks dubbed the ‘14 days of MERGEtember’, Subscribe to @GainsANN on Telegram to stay up to date.