Ethereum is the second most popular cryptocurrency in the world behind bitcoin and also the second most valuable in terms of total crypto market capitalisation.
Though an upgrade of bitcoin in terms of having more functionalities and applications (DeFi, Gaming, NFTs), however by design, the way the network functions and processes data to agree to a value is similar to bitcoin. The latter is referred to as a consensus mechanism; which are sets of rules that determines how transactions are verified and added to the blockchain, network fees for transactions, rate of inflation, etc.
Both Bitcoin and Ethereum use Proof-of-Work (POW) consensus mechanism which is heavily energy-dependent and require miners using intensive computer power to solve complex mathematical problems before transactions are verified and added to the network ledger (blocks). This ensures high security of the chain and prevents an easy hijack (51% attack) of the network by bad actors.
A New Era? The ETH Merge!!!
Ethereum was launched in 2015 with Proof-of-Work (POW) being it's consensus mechanism. As the years progressed and the blockchain experienced serious scaling issues, the larger Ethereum community led by its influential Co-founder Vitalik Buterin, sought ways to change the network consensus following various upgrades from POW to a more energy efficient one. This change dubbed ‘The Ethereum Merge' is set to occur likely in September as announced in the just concluded Ethereum Dev Conference held in France in the month of July.
What is ETH Merge?
ETH Merge is the final switch in Ethereum consensus mechanism from the energy intensive Proof-of-Work to a more energy friendly and efficient Proof-of-Stake (POS). The latter requires supporters of the network to stake (lock up their coins similar to a fix deposit) their Ethereum assets into the network smart contract for a period of time as a way to provide network security, verify transactions, amongst others and in return earn passive income of more Ethereum as staking rewards.
The POS model is more energy efficient compared to the POW consensus model. According to qualitative claims, it wil help the Ethereum network cut down its total energy cost by over 90% from its current value. These proponents say, will not only improve its scalability and security but most importantly, make Ethereum more sustainable as it adds more functionality to its ever growing list of applications. One thing is certain though; the merge event will surely transition the largest programmable blockchain into a new era. It is definitely worth the hype!!!!