The merger is supposed to make Ethereum 99pc more energy efficient, but some experts argue that it does not solve other problems on the network, such as scalability and cost.
Big changes are coming to the crypto space, with a long-awaited upgrade to the Ethereum blockchain scheduled for next month.
The upgrade, known as the Ethereum merger, will see the blockchain move from its current energy-intensive system to a more environmentally friendly mechanism. The non-profit organization Ethereum Foundation claims that this upgrade will lead to greater scalability, security, and resilience.
The merger is to take place between 10 and 20 September. This is hailed by some as a leap forward that will address common cryptographic criticisms of high power consumption. However, some experts argue that there are still various problems that the merger does not solve.
What is an Ethereum merger?
Ethereum is currently working on a proof of work system, which is a decentralized consensus mechanism.
It is maintained through the act of “mining”. Simply put, this involves solving complex equations to create new coins and verify transactions on the blockchain network. It is also the method behind the popular cryptocurrency bitcoin.
The process of mining cryptocurrencies has long been criticized for the amount of energy consumed. An analysis by the New York Times last year found that bitcoin mining consumes about 91 terawatt-hours of electricity annually, more than all of Finland.
The Ethereum update involves merging this proof-of-work system with a proof-of-stake layer that aims to eliminate the need for energy-intensive mining.
With this method, the network will rely on trusted validators to validate transactions. These validators will invest in the form of some cryptocurrency that acts as collateral that can be destroyed if the validator is “dishonest or lazy”.
What are the benefits?
Proponents of this consensus mechanism argue that it will lead to improved energy efficiency and reduce hardware barriers to entry. According to the Ethereum website, the merger is expected to reduce the power consumption of the blockchain by around 99.95%.
Cronos managing director Ken Timsit said the merger overcomes “controversial pain points in network evolution” by offering a solution to “excessive power consumption.”
Lisk co-founder Max Kordek added that the merger is not “groundbreaking” as proof-of-stake blockchains have been around for years. However, Kordek said the Ethereum merger is “proof that it can change,” showing the potential for more significant improvements that could be adopted by the network.
“The merger will help the global attitude towards cryptocurrency and Web3 because the second largest blockchain is becoming more and more green,” Kordek said. “This is also a necessary step for Ethereum to flip bitcoin, which I foresee will happen during the next major bull market.”
The Ethereum website says the merger is “setting the stage” for future scaling upgrades such as sharding, which involves splitting the main blockchain into separate shards.
While many support this change, concerns have been raised that other issues need to be addressed in order to facilitate the mainstream adoption of blockchain. Timsit noted several issues that will remain after the merger.
“This does not solve the remaining issues around scalability, transaction fees, or ease of use, as Proof-of-Stake blocks are only produced (about) 10% faster than Proof-of-Work blocks,” Timsit said.
Swirlds Labs CMO Christian Husker said the merger brings a lot but does nothing to reduce transaction costs and only provides “a small increase in block space.”
Husker also noted issues with sustainability claims as Beacon Chain Etherum, which introduced proof of stake to the ecosystem, depends on around 410,000 validators to create blocks on the chain.
“Thus, their power consumption will remain significantly higher per transaction than some other proof-of-stake networks,” Husker said.
The upcoming upgrade has led to a surge in mining as some expect prices to rise after the merger. According to CoinTelegraph, the number of people involved in cryptocurrency mining has reached a four-year high.
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