After a seven-year impressive run, the decentralized cryptocurrency has made one of the biggest updates since its birth through the merger from proof of work to proof of stake, as complex as that sounds to newbies we would be giving you a breakdown on what it means and how it would impact the cryptocurrency called Ethereum.
PROOF OF WORK TO PROOF OF STAKE:
The merger was to transfer from proof of work also known as a POW to proof of stake (POS), proof of work uses a system in which miners secure the block resulting in the usage of electricity in exchange for block issuance and a portion of transaction fees, while the proof of stake method the network is ensured by validators who have to stake Eth (short for Ethereum) to validate the network, the proof stake is the Ethereumâ€™s consensus mechanism which enables validators explicitly stake capital in the form of Eth into a smart contract built on the Ethereum network, this staked Eth then acts as collateral that can be pulled down if the validator behaves dishonestly or nonchalantly, so the validator is taxed with scrutinizing new blocks generated over the network are valid and occasionally propagating new blocks themselves.
HOW DOES PROOF OF STAKE WORK
In the proof of stake mechanism, the validator deposits 32 Eth into a contract and runs three separate programs on their computer which are a consensus client, an execution client, and a validator, After the deposit, has been made the user is automatically enrolled to an activation queue that limits the rate of new validators joining the network, Once activated, validators receive new blocks from fellow validators on the Ethereum network, the transactions which are delivered in the block are then re-executed and the block signature is checked to ensure the block is valid, the validator then sends an attestation in favor of that block across the network to complete the transaction.
ADVANTAGES OF THE MERGE
1) The transition of Eth to proof of stake would cut down on power usage by 99.5% which would put to rest the concerns about the mining of Ethereum being harmful to the ecosystem.
2) It will be ESG compliant to help regulatory organizations allow financial institutions to enter the Ethereum world.
3) The merger will also enable Ethereum enthusiasts to store Eth in the comfort of their homes by being consensus participants, thereby decentralizing the network, and making it secure and resistant to attacks.
4) There will be a wide distinction between Ethereum and bitcoin, as bitcoin would be on the proof of work network while Eth would be on the Eco-friendly proof of stake network.
5) The merger will reduce the amount of Eth supply thereby creating a deflationary asset as it spikes interest.
6) It will lower barriers to entry since thereâ€™s a reduced hardware requirement and no need for elite hardware to generate new blocks.
The proof of stake mechanism has shown to be a viable and more secure network and the merger would grant Ethereum a renewed advantage concerning the topic of the ecosystem and cut down on mining costs, this is a win for the cryptocurrency space which has grown to gain worldwide acknowledgment if you wish to swap your cryptocurrencies from and into Ethereum fast and easily, click on the link below.
Disclaimer: Ethereum is a cryptocurrency. As such, it is highly volatile trading, and investing in cryptocurrencies requires in-depth knowledge and discretion to avoid excessive losses.