Ethereum has been on the verge of a significant transformation since 2015. Ethereum, like Bitcoin, makes use of a system known as the Proof of Work (PoW) for validating its blocks. In Proof of Work (PoW), Ethereum miners vie with one another through powerful and advanced computer systems to evaluate a cryptographic puzzle.
Amongst the Ethereum Miners, anyone that can figure out the solution to the puzzle is suitable to validate the block and return home with a massive reward in crypto. The miner with the most efficient computer has the upper hand. With this concept, PoW is an energy-consuming system that can significantly impact the environment. In the last few years, there have been many talks within the Ethereum Community concerning making changes to their consensus algorithm from Proof of Work (PoW) to Proof of Stake(PoS). Some new blockchains, including Solana, Cardano, Avalanche, and others, use the Proof of Stake (PoS) system.
In the Proof of Stake system, the use of energy-consuming hardware is unnecessary. To validate blocks in the system, miners can stake a particular amount of crypto-asset in a smart contract, and miners’ validation of a Bad block will ultimately lose the staked crypto coins.
The implementation process of the Proof of Stake system started in December 2020. The following step, and questionably the most significant one, is known as “The Merge .” Here, Ethereum will no longer be minable by ETH miners, and Proof of Work (PoW) will be the only means of validating blocks on the Ethereum blockchain.
Catalysts For Ethereum’s “Merge“
Mark Cuban says that two major points are involved in the highly bullish nature of “The Merge .” There are two sides to this. On one side, The Merge will drastically reduce the impact of the Ethereum network on the environment. Because Energy consuming hardware is not required, the carbon footprint of Ethereum nearly turns neutral. This event will render the authenticity of the environmental argument against Web 3, Ethereum, and Non-Fungible Tokens (NFTs) void. As this argument is out of sight, various institutions would quickly adopt this new technology.
On the second side, the distribution of Ether would reduce by roughly 90 percent. This change is undoubtedly going to be a major one for Ethereum. A 90 percent reduction in issuance equals bitcoin split into three halves. Ethereum is burning a more significant proportion of users’ gas fees to operate on the Ethereum network. This new development is due to the introduction of the EIP-1559 around June-July of 2021. You will get a deflationary coin when you add the 90 percent reduction on Ethereum distribution.
The upgrade from Proof of Work (PoW) to Proof of Stake (PoS) will rapidly change the Ethereum Network and handle its significant challenges. The planet’s giant Decentralised and anti-censorship computer will now be economically supportive, and its native token will be on deflation. As this date is gradually approaching, the merge is not looking like it’s priced in yet.