Last Updated on Sep 16, 2022 by Aradhana Gotur

The Ethereum blockchain, the largest behind Bitcoin, has seen a major upgrade called ‘The Merge’. Ethereum is switching to a more energy-efficient method of validating transactions that take place on the platform, known as Proof-of-Stake.

When did it happen?

The Merge was executed on Thursday. This completed Ethereum’s transition to Proof-of-Stake consensus, officially deprecating Proof-of-Work and reducing energy consumption by approximately 99.95%.

What is Proof-of-Stake?

The blockchain functions on two key algorithms – Proof-of-Work (PoW) and Proof-of-Stake (PoS). Both these methods help secure transactions by penalising bad actors looking to commit fraud differently. 

  • With PoW, crypto miners had to solve a complex math problem using trial and error. The first miner to solve the problem received the fees. This incentivised miners to use faster computers and as the Ethereum network grew, the transactions became slower and more taxing on the environment.
  • PoS makes miners pledge an amount of cryptocurrency before they validate any transactions. If miners do not verify their transactions correctly, they could lose the pledged amount. Additionally, miners are now randomly allotted transactions to validate instead of competing to solve the math problem. This reduces processing times and electricity consumption significantly. 

What should holders and users do?

  • As a user or holder of ETH or any other digital asset on Ethereum, as well as a non-node-operating stake, there is no need to do anything with the funds or wallet due to The Merge.
  • Ethereum also clarified that there is no such thing as old ETH/new ETH or ETH1/ETH2 and wallets work exactly the same after The Merge as they did before.
  • Any funds held in the wallet before The Merge will be still accessible after The Merge.

How do holders stand to benefit?

  • In the PoW model, huge amounts of energy to power computers solve complicated math equations that are needed to validate a transaction.
  • By moving to the PoS algorithm, Ethereum will let users have a stake in the blockchain. This process of validation consumes very less energy.
  • The Merge will lower Ethereum’s carbon footprint by over 99% and this could attract more environmentally conscious investors to the platform.
  • The value of Ether, Ethereum’s native cryptocurrency, is likely to benefit as more users join in as the platform offers quicker transactions and lower fees eventually.

Will Ethereum be less vulnerable to hackers after Merge? 

  • After Merge, the required initial investment to validate transactions on the blockchain would cost around $55K or 33 ETH.
  • That’s a cost everyone would have to bear to get into the network in the first place. Due to this barrier, Ethereum may become a lot safer.
  • Ethereum’s susceptibilities may differ due to the underlying design change to the network, but the security risks will remain.

About the news author: This news post has been contributed by The Boring News Co. which is a free daily email newsletter that gets you updated on the most important events across policy, business, international affairs, legal, and sports categories in under 5 minutes. They claim to deliver news with no sensationalism, gossip, political slugfests, or opinions – just the facts that matter in bullet points.

Thomas Sampathraj
Inline Feedbacks
View all comments
55,00,000+ users trust Tickertape for Investment Analysis!
55,00,000+ users trust Tickertape for Investment Analysis!

The blog posts/articles on our platform are purely the author’s personal opinion and do not necessarily represent the views of Anchorage Technologies Private Limited (ATPL) or any of its associates. The content in these posts/articles is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, please consult a professional financial or tax advisor. The content on our platform may include opinions, analysis, or commentary, which are subject to change, without notice, based on market conditions or other factors. Further, the use of any third-party websites or services linked on the website is at the user's discretion and risk. ATPL is not responsible for the content, accuracy, or security of external sites. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. The examples and/or securities quoted (if any) are for illustration only and are not recommendatory. Any reliance you place on such information is strictly at your own risk. In no event will ATPL be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this website.

By accessing this platform and its blog section, you acknowledge and agree to the Terms and Conditions of this website, Privacy Policy and Disclaimer.