The cryptocurrency community is abuzz about what could prove to be a landmark event in the burgeoning world of digital currencies: a major upgrade – dubbed “the union” – of the ethereum blockchain. Cryptocurrency enthusiasts say the merger will greatly reduce the environmental impact ofand more generally improve its usefulness as a means of conducting financial transactions. among other uses.
But what exactly is Merge and how could it change the future of cryptocurrencies?
What is union?
Ethereum, launched by Canadian computer programmer Vitalik Buterin in 2015, it is a blockchain (or digital ledger) used when cryptocurrency investors buy ether. It is one of the most used blockchains in the world, second only to the bitcoin network. There are more than 71 million crypto wallets on the ethereum blockchain today, according to the Ethereum Foundation, a group of developers who now oversee the blockchain.
Think of Merge as the next generation, or version 2.0, of. After nearly two years of thinking and testing a new way to conduct transactions, the Ethereum developers say it is finally ready for prime time. Put simply, Merge aims to reduce the number of people and computers required to add another block of data to the ethereum network.
The change is called Merge because, as of now, there are several ways to create a new data block. The developers plan to combine those existing methods into a single process which they say is safe and environmentally friendly.
When should this happen and why now?
The exact timing for the merge isn’t clear, but the developers said they’re giving themselves a September 19th deadline to apply the finishing touches. In August, they said they would start launching the Merge on September 6 and would finish everything between September 10 and September 20, Coindesk reported.
The merger is happening now because Ethereum is mature enough to handle financial payments, store non-fungible tokens, trade cryptocurrencies, and host smart contracts, said blockchain expert Merav Ozair. But streamlining the process of adding data to the blockchain could make those and other transactions much faster, according to the developers.
Ethereum can carry out 15 transactions per second in its current form, said Ozair, who founded startup company Blockchain Intelligence. But if the merge is successful, the blockchain could eventually handle up to 100,000 transactions per second, “far beyond what Visa and Mastercard can do,” he said.
How would the merger reduce carbon emissions?
In a blockchain network, transactions are not verified by a bank, credit card company or other third party. Rather, it relies on a competing computer network to solve complex problems in exchange for tokens. It takes thousands of computers to verify transactions on the ethereum blockchain, a mechanism known as “proof of work”.
All those powerful server computers that disappear together require large amounts of power. The ethereum blockchain uses around 112 terawatt hours of electricity per year, roughly the same amount of energy used to power the Netherlands. That level of energy consumption releases around 53 tons of harmful carbon emissions into the environment each year, the same amount that Singapore produces in a year.
The merger replaces the proof-of-work system with an alternative approach called “proof of stake”. In that system, cryptocurrency owners known as “validators” verify transactions and record them on a new block. Since proof of participation involves fewer people using their computers to verify transactions, fewer terawatt-hours are burned.
Using proof-of-stake, Merge is expected to reduce the energy consumption of the ethereum blockchain by 99.9%, the developers said.
Will the merger make cryptocurrency use safer?
Most likely. Since December 2020, ethereum developers are essentially running two different versions of the blockchain at the same time. The Beacon version was used so that the proof-of-stake system could be tested, while the Mainnet version continued to work as usual using proof of work. But having both versions running gave hackers twice as many access points to potentially attack Ethereum.
After the merger, the Mainnet version will disappear and financial transactions will live on Beacon only. Eliminating one version of the chain, combined with a small pool of validators, will reduce the chances of a hacker damaging the blockchain, the developers said.
It is important to note that these changes have not yet been shown to make accounts more secure because they have not been tested on a large enough scale. Ethereum developers posted a notice on the foundation’s website, explaining how hackers could attempt to scam users for the digital currency.
Are there any risks or disadvantages?
Moving to a proof-of-stake system will likely create haves and haves among validators and everyone else using ethereum, said Bryan Daugherty, director of global public policy for the BSV Blockchain Association.
This is because, to become an ethereum validator, someone must invest at least 32 ether – about $ 52,000 – and agree to keep those tokens hidden in a separate account. Under these rules, anyone who doesn’t have that much cryptocurrency can’t serve to validate Ethereum transactions, Daugherty said.
“The way I look at this is that the plan now is to eliminate mining in general and assign these coins to those with the largest positions,” he said.
Accepting to put away the ether in exchange could come back to haunt validators as well, especially if the price of the ether drops dramatically and someone wants to sell it, Daugherty said.
“You’re forcing people to close your coins,” he said. “It looks like a huge red flag to me.”