Ethereum’s New Updates “The Merge”
Ethereum is the second largest cryptocurrency in the world after Bitcoin with a current value of $18880 USD per Bitcoin whereas it is $1,329.32 USD.
All the crypto enthusiasts across the world went gaga when Ethereum announced a major update in their mining system earlier.
Finally, the most anticipated update known as ‘The Merge’ took place on September 15, 2022.
Since then, there had been binary as well as mixed opinions about the Ethereum cryptocurrency blockchain system post ‘the update’.
Before we get there, let us gain some comprehension of what is ‘The Merge’.
The Ethereum merge is a major shift in the consensus mechanism of the Ethereum blockchain.
The major shift is essentially from the ‘Proof of Work’ model to the consensus mechanism to the ‘Proof of Stake’ model of blockchain technology.
Ethereum blockchain: What are ‘Proof of Work’ and ‘Proof of Stake’?
The Proof of Work is a model of consensus mechanism of a cryptocurrency blockchain. It is used to authenticate individual transactions in a blockchain system during cryptocurrency mining without involvement of a third party.
The Proof of Work model was invented by Satoshi Nakamoto, the founder of Bitcoin. After it went public, the Proof of Work code was copied by other cryptocurrencies.
Originally, Ethereum used the Proof of Work mode but it has various limitations to it which made it shift to the Proof of Stake model.
The Proof of Work has time limitations to it. It takes 10 minutes for a transaction to get verified and appear on the blockchain. Also, the maximum number of transactions that can take place in this model is 7 per second.
To mine Bitcoin, it takes a lot of time as there are difficult unique codes to be solved therefore increasing the transaction fee. It also consumes of a lot of electricity which adds up to the overall cost of the cryptocurrency.
All of these limitations are checked in the Proof of Stake model as the dependency of time is reduced. In this model of consensus mechanism, the number of transactions increases to 1000 per second.
The proof of stake works on the principle of staking more coins in the system to receive more profit.
This eventually reduces the overall transaction cost of the cryptocurrency and the consumption of electricity is dramatically reduced.
To have a detailed understanding read more
Ethereum’s Co-founder recommends Proof of Stake shift to other cryptocurrencies, read more
After this major update, there has been a dip in the value of Ethereum but analysts have faith in the long-term benefits of the Proof of Stake mechanism over its temporary disadvantages.
Investorplace recommends investors to not worry about Ethereum’s ‘post-merge drop’, here’s why