“The Ethereum Merge (or) ETH2.0” — Most anticipated event in the cryptocurrency
The Ethereum Merge is the most anticipated event ever since it was announced in 2015. Let’s dive deep into it, and see what it is!
Ethereum is the second largest cryptocurrency following Bitcoin, which has smart contract functionality and mainly focuses on decentralization using blockchain technology. Then, what’s with the term “Ethereum 2.0”? Ethereum 2.0 is a new version of Ethereum, which uses a different consensus mechanism from Ethereum to verify transactions.
Consensus Mechanism!? What’s that mean? It’s a set of rules established for members of all nodes to implement a new change in the network. In layman’s terms, it’s a mutual agreement done by everyone on the network, to implement a new change globally. It makes the blockchain viable and does this by solving the double spend problem.
In the Ethereum Merge, the current consensus mechanism, Proof of Work(PoW) is replaced by the Proof of Stake(PoS) consensus mechanism.
But Why? What’s the con with the Proof of Work(PoW) consensus mechanism? In PoW, cryptocurrency miners are intended to solve a complex mathematical problem(a unique alphanumeric string of 64 characters), and the one who finds or guesses the hash below the difficulty level, gets a chance to add his/her block to the network. It uses a tremendous amount of computational power. The one who solves first will be rewarded, the rest of them aren’t. The amount of computational power, they used is wasted. So, the Ethereum mainnet currently uses this mechanism, and due to the PoW’s inefficiency and fear of being centralized (since normal humans can’t afford that much computational power and companies with huge computational power can take over half of the mining), Ethereum founders replaced Proof of Work consensus mechanism with Proof of Stake consensus mechanism.
In the Proof of Stake consensus mechanism, the user stakes their own money(up to 32ETH) to win the right to validate the transaction and add a block to the blockchain. The more amount, the user stakes, there’s a chance to validate the transaction and in return certain amount of crypto is also earned. In this consensus mechanism, if a bad actor is involved, he/she is penalized financially too.Since this consensus mechanism is much more environmentally friendly compared to Proof of Work and mainly PoS is gonna reduce the gas fees for Ethereum by around 99.5%.
PoS consensus mechanism is good! But how it will be replaced on that large Ethereum mainnet?
Replacing the PoW with PoS in mainnet is a complex process though, Ethereum founders managed to attain it. In December 2020, they launched Beacon Chain, which works on the Proof of Stake consensus mechanism parallel to the Ethereum Mainnet. Among the three phases of Ethereum2.0
- Beacon Chain
- The Merge
- Sharding
The second phase of Ethereum2.0 “The Merge” gonna happen in September 2022, when the beacon chain merges with the Ethereum mainnet and works in the Proof of Stake consensus mechanism.
After the merge, Ethereum will be fully scalable and can handle more the thousands of transactions per second, while it can currently handle 7–15 transactions per second. However, it isn’t that easy to make this merge, so it’s done by moving step by step.
