Ethereum’s Merge on cryptocurrencies’ future

Ethereum blockchain fully transitioned to a new way of processing transactions.
Ethereum’s Merge event, as it is known, could change the nature of crypto and Web3 itself. Developers say the transition to what is called a ‘proof-of-stake’ consensus mechanism will cut Ethereum’s energy consumption by 99.95%.

Ethereum is a decentralised cryptocurrency, meaning that it does not have institutions like banks approving the transactions that happen on its network – the approvals were earlier happening under the proof-of-work(PoW) consensus mechanism which was essentially done by miners.
- Proof-of-work mechanism- Miners would compete to solve complex mathematical puzzles using a massive infrastructure of cutting edge computer hardware, and the first one to solve the puzzle would be chosen as the validator. This method was almost entirely dependent on crypto farms, which are massive warehouses lined with rows of computers which would solve the puzzles.
Ethereum is one of the most used platforms by developers to build decentralised apps (dApps), smart contracts, and even crypto tokens.
The platform’s currency, Ether, is only second to Bitcoin in terms of market capitalisation.
The change in the way Ethereum builds the blockchain comes with not just environmental consequences, but also major cyber and financial security implications.

Decentralised transactions are processed on blockchains using consensus mechanisms. Ethereum’s former method, ‘proof-of-work’, which is also used by Bitcoin, needs powerful mining hardware that consumes a lot of electricity and generates enormous amounts of heat to solve extremely difficult mathematical puzzles. The solution would let new transactions be added to the blockchain – and reward the miners with crypto.
Many environmentalists, policy makers, and regulators have strongly criticised the impact of Bitcoin mining on local communities.
Ethereum’s website admitted that the crypto’s total annualised power consumption nearly matches that of Finland while its carbon footprint is comparable to Switzerland. For some time, European countries even mulled a crypto mining ban, while China actually carried out a nationwide crackdown on crypto miners

The revamp, known as ‘The Merge,’ will cast aside the need for crypto miners and gigantic mining farms, who had previously driven the blockchain under a mechanism called ‘proof-of-work’ (PoW). Instead, it has now shifted to a ‘proof-of-stake’ (PoS) mechanism that assigns ‘validators’ randomly to approve transactions and earn a small reward.
Ethereum decided to switch to a ‘proof-of-stake’ consensus mechanism, where Ether owners will stake their own coins in order to serve as collateral and help process new blockchain transactions, in return for rewards.

Switching to a proof-of-stake consensus mechanism would violate the principles of decentralisation outlined in the white paper released by Bitcoin.
It would also represent losses in the millions of dollars for individual miners and companies trying to solve the puzzles that would reward them with Bitcoin.
- Consequences of crypto mining across the globe have included mass electricity blackouts, fire accidents, overburdened grids, struggles between locals and crypto miners for more control over the energy supply.

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