Countdown To The Ethereum Merge: Here's All You Need To Know
Vitalik's vision for the future of the Ethereum blockchain is almost here. Time to dive into what this means for ETH and NFTs!
Energy & Ethereum
At the core of Ethereum's mission lies a value system that prioritizes positively impacting the environment. In about 3 days, Ethereum is set to reduce its energy consumption by -99.95%. There's often confusion around blockchain technology and its overall energy impact. Beyond September 15th, a greener Ethereum ecosystem will come into existence, setting a historical benchmark for the world to see.
This move will, in many ways, permanently shift the narrative on how people view cryptocurrencies. It is public knowledge that, at the time of writing, ETH consumes 112 TWHr/Yr (Terrawatt Hour per Year), a consumption rate larger than that of Argentina. But let's put this into context - there's a company that uses twice the amount of energy in the same time frame, more than the Australian continent.
Know what it’s called?
But this comparison chart is almost irrelevant today. Ethereum's rallying call in its mission to be ultra-sound money is roaring strong, and we're here for it. This week marks a turning point in the ongoing bear market.
So if you're just tuning in to the crypto world, you're right on time. This article will briefly cover what The Merge is, how it saves Ethereum energy, how we, as NiftyKit, play our part, and the future implications. Let’s dive in!
What Is The Merge?
Simply put, think of The Merge as a software update that enables Ethereum to be more scalable while consuming less energy. Vitalik Buterin aims to solve his own scalability trilemma with The Merge. The trilemma states that ideally, for a blockchain to be efficient, it needs to solve three problems - security, decentralization, and scalability. Presently, the Ethereum Mainnet is a secure and decentralized blockchain.
The Merge is the first big step towards scalability and making Ethereum a future-proof blockchain. At its current state, even though ETH is one of the most widely adopted blockchains in the world, it is unable to scale owing to its Proof of Work mechanism for validating transactions.
The Merge combines the current Ethereum Mainnet as an execution layer to its relatively new consensus layer - The Beacon Chain, launched in December 2020. By switching to a proof-of-stake model, Ethereum will have the ability to increase its scalability for faster transactions and lower fees. This means that Ethereum will now be faster, more secure, and more scalable (meaning new features, apps, and upgrades).
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Proof of Work vs Proof of Stake
Proof of Work (PoW) is an algorithm that uses mining hardware (large computer setups, many graphic cards) to solve math puzzles and validate a blockchain transaction. Validating a transaction is what makes a system "decentralized." In return for validating transactions on their blockchains, miners receive cryptocurrency (in this case ETH tokens), as rewards for their efforts.
Proof of Stake (PoS) refers to an algorithm where users can validate transactions by holding tokens or coins within their wallets—rather than using special mining hardware or computers like PoW does. As long as you hold some tokens within your wallet at all times, you participate in voting rights and earn rewards from the ecosystem.
A Proof of Stake system also has other advantages, such as:
Increased Transactions Per Second: Because it doesn't require a lot of energy or resources, it could allow for more transactions per second than PoW does.
Better Decentralization: PoS allows for greater decentralization because you don't need huge amounts of computing power to validate transactions or blocks.
Long-Term Energy Efficient: PoS can be much faster and better for the environment as it does not rely on bulk loads of computing hardware.
Playing Our Part
Since we started, we've stayed true to the mission of seeking safety for the environment. Our tools allow our global creators to offset their carbon footprint via our partnership with Aerial. We also provide alternative blockchains to the Ethereum Mainnet, like Polygon & Optimism.
The tools we build keep in mind the impact the communities can have in the real world. We are advocates of crypto philanthropy, and to strengthen our cause, we've also teamed up with The Giving Block recently to further reinforce our energy efforts.
The Merge is a welcome change at NiftyKit and unlocks an array of possibilities that didn't previously exist. Faster transaction times, increased interoperability, scalable solutions, and more allow mass adoption to be set in place. And with that, the advancement of the NFT landscape, and we're ready for it!
Impact Of The Merge
There are a lot of theories regarding life after The Merge, but let’s take into account the most prominent, positive predictions. In its Proof of Work state, a majority of the initial 72 million ETH was distributed to incentivize miners to ramp up the network's security. Post the Merge, the incentivization ceases to exist, which causes a net reduction of about 90% of annual ETH issuance tokens. This "triple halving" event results in ETH becoming a deflationary currency in the long run.
New upgrades and possibilities in a space that moves a hundred miles a minute will unlock the next phase of Ethereum. The greener initiative would also be a welcome signal to potential investors, which may also lead to a turning point amid the ongoing bear market. There are also theories that, if all goes well, ETH may even become deflationary post-merge. Another reason to get into the ecosystem.
TL:DR - If you’re still confused about what The Merge is and what it represents, here’s a fun thread analyzing The Merge in NBA terms:
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