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What is «The Merge» or Ethereum Merge?

by Finscanner

2 min read

To begin with, Ethereum is the first cryptocurrency to introduce smart contracts, a technology that allows automatic execution, control, or document legally relevant conditions live on the blockchain. Ethereum has become so popular that it still hosts the lion's share of applications and projects. However, the downside is that the network is struggling with high congestion and consumes a large amount of energy. First of all, we are talking about proof-of-work (PoW), the environmentally unfriendly consensus mechanism that Ethereum uses today (known as mining). This mechanism is also not sustainable or scalable in the long term.

What’s with «The Merge»? It is a solution in the interest of present-day realities. Merge Ethereum will mark the end of the underpinning concept of blockchain technology proof-of-work (PoW) for Ethereum, in favor of the proof-of-stake (PoS) mechanism. Technically, it means the merging of an already running beacon chain with the existing Ethereum mainnet chain.

What will happen?

The Ethereum Foundation's decision to change the consensus mechanism to PoS avoids high levels of computational power and is therefore in line with current environmental concerns. However, this is a complex process requiring considerations and tests of various variables.

For stable operation, Ethereum launched a parallel PoS network beacon chain to test the PoS consensus process staking. It is separated from the mainnet and is for stakers only. The beacon chain is expected to be successfully tested and merged with the Ethereum mainnet this year. Eventually, it will:

  • Alleviate participation in the network, making it more attainable for more users (not just miners);
  • Provide equal distribution of network rewards, opening-up yield to more users;
  • Dramatically reduce Ethereum's energy consumption by an estimated 99.5%.

However, contrary to the misconceptions of many users, the merge won't dramatically reduce gas fees. That won't happen until the final stage of Ethereum's massive technical upgrade, which is due at some point next year. Still, the merge itself is a long-awaited event that is crucial for the whole blockchain industry.

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