What is The Merge and what‘s its purpose for Ethereum?

Within the crypto market, Ethereum's The Merge has been long awaited. The Merge is an upgrade to the Ethereum network that involves moving from Proof-of-Work (PoW) to Proof-of-Stake (PoS).

PoW and PoS are both consensus mechanisms and ensure that the nodes in a blockchain's network operate in the same way. In this way, the nodes can reach a consensus with each other and ensure that the blockchain works as it should. And should something go wrong? Then the consensus mechanism ensures that the nodes work together for a solution.

Proof-of-Work is a mechanism that uses miners. They need to have checked all transactions as soon as possible, competing against other miners. The miner who finishes first is allowed to add a block to the blockchain and receives a reward for doing so.

Proof-of-Stake works differently and consists of validators. They have to secure a number of crypto coins and are chosen, based on the number of coins, to validate transactions and add blocks. If they do something wrong, the network can take away the coins that have been pinned. Therefore, someone has a higher chance of being chosen if they are holding a large number of crypto coins. This is because they are then at greater risk and will try harder.

It is special that Ethereum is moving from Proof-of-Work to Proof-of-Stake, because never before has any other blockchain done that. That's why many Ethereum developers find The Merge an exciting transition. After all, we don't yet know if this will go well, or what might happen if it doesn't.

Some crypto traders are speculating on hefty price increases after The Merge, while others are expecting Ethereum's price to fall. Always do your own research on Ethereum and The Merge and do not simply follow the advice of others.

The merge of the Beacon Chain and the main-chain

Ethereum has been using Proof-of-Work from the beginning, but will be moving to Proof-of-Stake. The Merge is part of the entire upgrade to Ethereum 2.0. The main network was still using PoW, while the Beacon Chain was using PoS before. You can think of the Beacon Chain as the test network that was already launched at the end of 2020. Developers wanted to make sure everything worked properly before upgrading the main network.

The Merge is actually the process of merging the main-chain and the Beacon Chain, hence the name of this upgrade.

What is the purpose of The Merge?

Ethereum is obviously not moving to Proof-of-Stake without good reason. The main goal is to make the blockchain more scalable and energy efficient.

It's no secret that Proof-of-Work consumes a lot of energy and causes a blockchain to scale up awkwardly. Proof-of-Stake, on the other hand, consumes much less energy. This is because only one validator checks the same transactions at the same time. In a network that uses Proof-of-Work, all the miners are processing the same transactions at the same time, while the work of only one miner is going to be used for the blockchain.

After The Merge is complete, Ethereum should also be a lot more secure. And that's important. After all, Ethereum is seen as the main platform for DeFi. Many developers have already built decentralized DeFi applications on Ethereum that more and more people are using. Within these applications and smart contracts, a lot of crypto is held, which has a huge value. So it's important that the blockchain is secure so that users don't lose their cryptocurrencies.

Can I set up a validator node after The Merge is completed?

Anyone can set up a validator node in Ethereum's network, though you'll have to dig deep: you'll need a minimum of 32 Ethereum coins to strike. So, depending on the current value of Ethereum, the cost can reach several tens of thousands of dollars.

Fortunately, there are other ways to strike on Ethereum. For example, you can also delegate your crypto coins to other validators. They will deploy your coins and will distribute rewards.

If you want to stake Ethereum, you can do so at Coinmerce. From your wallet, with a few clicks, you can deploy your Ethereum for strike to earn a passive income.

What does the upgrade to Ethereum 2.0 look like after The Merge is completed?

After The Merge is completed, the upgrade to Ethereum 2.0 is not yet fully complete, although The Merge is considered one of the most important parts. After The Merge is complete, it is unfortunately not yet possible to transfer strike proceeds to other wallets. Until this is possible, the proceeds will remain tied up in the smart contract. Why are they doing this? To ensure security during the rest of the upgrade.

We will still have to wait for this feature. It is not yet known when this will be possible. Before adding new features, several hard forks will have to be performed.

Sharding will also be added in the future. This is a technique that will enable Ethereum to process transactions much faster. Sharding ensures that the blockchain is split into different chains. This gives each chain more room to process its own transactions, and this applies in particular to roll-ups.

Roll-ups are layer 2 scaling solutions that roll up transactions in a special way so that one can store more transactions in the same block. A roll-up can normally already process 4000 to 5000 transactions per second, but in combination with sharding this can increase to 100,000 transactions per second.

Just for comparison, before the upgrade to Ethereum 2.0, the blockchain could only handle 15 transactions per second. It caused users to sometimes have to wait hours before their transaction was processed. Not to mention the cost, which could run into hundreds of dollars.