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The Ethereum Merge — Is it the end of crypto mining?

”May you live in interesting times”, as ancient Chinese used to say. Well, these are definitely interesting times, especially when it comes to crypto-space and challenges we have to face as a community. One of such events, that is completely turning everything upside down is the Ethereum transition — known as The Merge.

The Ethereum Merge

Today — September 15, is the end of Ethereum as we all know it — the network switched its consensus mechanism from PoW (Proof of Work) to PoS (Proof of Stake).

The Merge and what changes

What does it change? Pretty much everything, however, most of the improvements will be implemented over a specific amount of time. Therefore, we are not going to see any particular increases in the network’s throughput and hence — lower transaction fees and higher scalability.

However, there is an immediate change which is actually the way the Ethereum network is secured and how the transactions are validated.

Difference between PoW and PoS

And so, here comes the main difference between PoW and PoS. In both types of consensus there are some principles and mechanisms that define what we call a blockchain.

In general, every blockchain (regardless of its type) requires some units that will be able to approve users’ transactions (preventing the network from potential frauds) and to gather them into the batches called blocks. These units, also called actors, are doing so in order to receive the rewards for maintaining and securing the network.

Rewards for maintaining and securing the network

Rewards are always being paid in the native coins of a particular blockchain and consist of two types:

  • paid for creating and approving another blocks (these are newly created coins),
  • transaction fees, paid by the users who want to send transactions on the blockchain.

What differs each type of consensus is the way the network is being secured and what are the requirements for the units to approve and to secure the network.

Rewards in PoW

In PoW consensus (the one Ethereum was based on before The Merge) transactions are being gathered in the blocks, which are being “mined” by the network members called miners. The miners are willing to use their hash-rate power represented by the highly specialized computing units such as ASICS to both secure and develop the network.

In PoW consensus, the main reward is being paid whenever the miner manages to mine a single block — in this case all of the reward goes to the one and only winner in form of newly mined coins.

Rewards in PoS

In PoS consensus on the other hand, transactions are being validated by so called validators, who have to put their own capital in the form of native coins of the network in order to secure it.

Becoming a validator in PoS blockchains doesn’t require such a huge amount of computing power compared to PoW consensus. In exchange, the main expenditure in this case for the actors is the aforementioned capital, called Stake. When it comes to rewards, these are paid again in two types:

  • the ones in the form of transaction fees,
  • the others whenever the new block is being created.

What’s different in the PoS rewarding system is that the rewards are being distributed among the validators, according to the capital they put in the form of Stake.

Will Ethereum be mined after The Merge?

Going back to The Merge. Given that it’s all about switching the consensus mechanism, does it mean that Ether as a native coin of Ethereum network won’t be mined anymore? Yes.

Does it mean the end of crypto mining? Absolutely not!

There is a huge discussion within the crypto community which type of consensus is better. Each of these types have both many pros and cons:

  • PoW consensus is considered to be a more secure and decentralized one. Hence there are still plenty of blockchains that are willing to stay with this type of consensus, and their native coins will have to be mined. These networks are Ethereum Classic, Ravencoin or Monero.
  • PoS based blockchains are far more scalable and therefore — faster and cheaper,

How to prepare for The Merge?

As a GamerHash app user (you can download the app here), you don’t have to do anything.* In GamerHash we always prioritize our users, that’s why our Team developed the mechanism that automatically chooses the most profitable coins to mine and adjust the parameters to your hardware for you.

* If you mine outside our app, with the use of an ASIC, you should switch manually to Ethereum Classic (ETC) or Ravencoin (RVN) pools. To do so, please follow our instructions under the link here.

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