Recently, the term of “Ethereum (ETH) Merge” has been skyrocketed, as we already know it is the most highly-anticipated event within cryptocurrency fans and community.
“The Merge” will mark ETH transition from the proof-of-work to proof-of-stake and deliver the ethereum 2.0. We have compiled 5 things you need to know about this event, that you can read here.
The difference between Proof-of-work and Proof-of-stake
In Proof-of-Work, transactions are verified by computers across a decentralized network.
Meanwhile, a Proof-of-Stake network uses validators to add the latest verified transaction to the block chain. The validators are compensated by receiving newly minted tokens in exchange for their own token, in this case ETH.
Reasons behind the transition
Here are the reason behind Ethereum moved from Proof-of-Work (PoW) to Proof-of-Stake (PoS),
- To increase blockchain security
- Reduce energy usage
- Reduce entry barriers by reducing hardware requirements
- Improve scalability by reducing hardware requirements
The Merge is more likely not reduce gas fees
Since The Merge only changes the consensus mechanism (the way Ethereum validates transactions), rather than increasing its capacity, it is unlikely to reduce gas fees in the short-term. Through the Merge, the PoS system will be able to process more transactions than before but not by much.
User and investors will have to wait for the update that is coming in 2023 called sharding. Right now the best way to reduce gas price is through layer-2 rollups.
After The Merge, what’s next?
Following The Merge, there are several other updates namely the surge, verge, purge, and splurge.
The surge will include the Shanghai upgrade, which will allow staked ETH to be withdrawn, as well as sharding.
The verge will allow user to become network validators without storing a lot of data, which makes the system more decentralized.
The purge comes with the goal to eliminate old network history, and the last, the splurge is a final stage after the preceding steps have been fine-tuned.
The scalability addressed in The ETH Merge
The initial plan of addressing scalability, through sharding, before the Merge, they were swapped due to the boom of layer 2 scaling solutions, and sharding is now expected to be available by 2023.