Ethereum Merge - A real revolution in the blockchain world or a re-division within the crypto world?
Since Bitcoin, blockchain and cryptocurrency mining – we have encountered two opposing views. While on the one hand we have crypto enthusiasts who see in the decentralization of blockhain systems a future and greater security based on transparency; on the other hand we encounter crypto critics and crypto skeptics. In the current settings, crypto enthusiasts hope to innovate to solve inflation, revolutionize business and provide financial salvation to people; and critics insist that this largely unregulated industry is linked to criminal activity, and that it is contributing to the financial meltdown of many naïve people who engage in crypto waters. What crypto is not in the world’s favor at all is the consumption of a huge amount of energy, as well as an increased carbon footprint …. “Carbon Footprint”).
A novelty in the crypto world that has shaken up current settings is the news that the Ethereum blockhain system has switched to a new mode. This event triggered a new avalanche of turmoil within crypto circles, which has reinforced hopes for many individuals and businesses that this ethereum innovation represents a historic moment that will make cryptocurrency part of the global capital market. One of the reasons for this is optimism related to the drastic reduction of energy consumption, which at the moment of the energy crisis that is shaking Europe – has an extremely great significance.
Why does the transition from proof-of-work to proof-of-stake system contribute to sharing opinions?
Source: Public News Time
Although enthusiasts finally have the opportunity to prove that the critics are wrong because the most ambitious, but also the most energy-efficient crypto project to date – called Ethereum “Merge” – has finally “merged”, there are still redivisions.
Namely, some crypto enthusiasts see this milestone as a betrayal of blockchain settings, namely— openness, transparency, network decentralization, and the lack of control by any centralized group. They believe that the merger will not revolutionize the entire Web3 world, and that it will not directly solve some of the biggest problems facing the Ethereum blockchain, namely – high transaction fees and low transaction speeds.
Let's go back to the beginning and repeat what Ethereum is and how does it work?
To reiterate, Ethereum is a decentralized blockchain platform with the domestic kritpo currency Ether (ETH) that pays transaction fees known as “gas”. Ethereum is also the most popular blockhain platform for the development of the Web3 world — or the “new internet”. The platform is versatile in nature, and is able to perform everything from currency movements and Non-fungible (NFT), to performing advanced processes with the help of ““Smart contracts” (eng. “smart contracts.” Also, developers use the Ethereum network to run decentralized applications (eng. “dApps”), as well as for the issuance of brand new crypto assets, known as ERC-20 tokens.
Let’s also recall in the “mainstream” world, which favors Ethereum:
The Finnish Immigration Service is 2018. made great progress in solving the migrant crisis, just approaching the world of the Ethereum blockchain. Teamed up with Finnish startup MONI, the immigration service offered refugees a prepaid Mastercard card linked to their digital identity. Blockchain technology, implemented through Ethereum, has made it possible to record financial transactions executed by card. This further made it easier for migrants to find employment and receive money, and also allowed them to pay their bills electronically.
Let's say we know all this now, but what's new in the Ethereum blockain and why do we call it a revolution?
After Ethereum co-founder Vitalik Buterin hinted that the effort they have been working on within the Ethereum blockchain for the past eight years will soon become a reality all media are tirelessly following the transition from the proof-of-work system. “Proof-of-Work”) to a system known as proof of work (Engl. “Proof-of-Stake”). About what exactly this means, we will explain to you in the next block of this blog.
Technical aspect of "Merge" or "Merge"
What’s new and what marks a turning point is that the Ethereum blockchain has merged into a system called Beacon Chain. In other words, the Ethereum blockchain has moved from a “Proof-of-Work” to a “Proof-of-Stake” consensus mechanism. This set the stage for innovation intended to address some of the fiercest attacks on the industry.
In the traditional system – “Proof-of-Work” (PoW) – on which Bitcoin itself rests, blockchains are protected by powerful computers. In PoW systems, miners race against each other 24/7 to solve complex mathematical calculations, thus confirming each new block of transactions added to the chain. In this way, the system defends itself from individual miners “spoiling” the entire blockchain, but at the same time consuming huge amounts of energy.
Conversely, with the new “Proof-of-Stake” (PoS) system, to which Ethereum recently switched, the blockchain does not rely on powerful computers to provide a high level of security. Instead, individuals or companies which in theory contributes to the correctness of the validation procedure itself. and Validators were rewarded with fresh Ethers for their work.
Review: Proof-of-Work vs. Proof-of-Stake
To summarize – the transition from PoW to PoS system means that miners who were previously encouraged to build and validate blocks for Ethereum main net, are no longer needed. This is because now validators who have invested ETH to secure the network , and have taken their place in the validation blocks in the chain. And now – with you we share the most important differences through hints, to together determine what we have learned.
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✓ One of the miners solves the problem, and gets the right to propose his block transaction as the next in the chain;
✓ Other nodes on the network check and adopt a new block, including it in the chain;
✓ The race to add a new block starts again with a new puzzle for the grid;
✓ The new winner adds the next block which is also checked and adopted.
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✓ In order to become validators at all, they must pledge 32 ethers, which are then locked for 2 years, and during this period – they cannot dispose of the pledged ethers;
✓ In this way, validators become a kind of guarantee that they will perform their work correctly, and their main role is to confirm the block, which is then added to the chain;
✓ In the event that they do not perform the work in accordance with the Ethereum PoS system, and if they try to enter fraudulent transactions – they will be fined, and the pledge of 32 eth will be taken away from them;
✓ In the event that they perform the work in accordance with the Ethereum PoS system – they will be rewarded with interest on their stake, on a daily or monthly basis, and will receive their 32 ethers after 2 years have passed.
ETH 2.0 has merged! Welcome to the "post-Merge" world! What can we expect?
Source:
Coin Page
Ethereum finally, two weeks ago, experienced a long-awaited merger. That event marked a historic transition to a different blockchain system designed to drastically reduce energy consumption – roughly 99% by some estimates .
After the merger took place, the public and media continue to share various opinions and predictions on social media about what all the merger will have an impact on.
One of the predictions is that the second largest blockchain system will be able to prove another of their promises to themselves, which is: greater resistance to inflation. So far, in the crypto world, this characteristic has been associated with Ethereum’s larger and more famous rival, Bitcoin. Many efforts have been made by Bitcointo increase the cryptocurrency’s resilience to inflation, and one of the better-known strategies is known as Bitcoin Halving.
The last Halving or literally halving Bitcoin occurred in May 2020, with the next halving expected in 2024. during 2020. The number of Bitcoin (BTC) that enters circulation every 10 minutes – known as the prize block – fell by half, or from 12.5 to 6.25.
Basically, the idea behind Bitcoin Halving is to reduce the amount of new Bitcoins in circulation, with the assumption that if demand remains the same, it further results in a further increase in the value of Bitcoin.
But let's get back to merging and Ethereum.
According to Lucas Outumyour – an analyst at crypto data and analysis
firm IntoTheBlock
– after the merger took place – the annual net issuance rate of Ethereum’s original cryptocurrency, ethera (ETH) – fell in the range from 0% to 0.7%. This is in parallel with a rate of about 3.5% before the merger. Another analyst, Simon Peters of eToro, shared how the level of new tokens coming to the network has been significantly reduced.
Other sources, such as – Ultra Sound Money estimate an annual inflation rate of 0.19% based on data showing that some 8100 ETH were added to the total ether offering after the merger.
In addition to the estimates and opinions of various experts, what we are currently witnessing in the market is that the price of ETH has fallen 14.4% since the merger, while on the other hand, the strength of the US dollar has risen.
What does this mean for the current economic situation in the world?
In a world where the world’s central banks are struggling to contain inflation – ethereum’s reduced issuance rate could contribute to boosting its attractiveness among investors in crypto but traditional markets.
The decline in ethereum’s inflation rate stems from two factors:
Reductions in new releases as a result of a change in the underlying blockchain system, but also from a separate mechanism known as EIP 1559 , where fees paid for online transactions are “burned”, or eliminated from circulation.
This graphic indicates that there has been a significant decrease in ETH inflation, implying a smaller amount of ETH for turnover. A shock caused by a decrease in supply, with possible future increased demand, could result in significant price movements.
What happened to the awards after the merger?
While the mining rewards were gone, rewards for increased stakes arrived.
Without rewards for miners, emissions dropped significantly. Nevertheless, prizes are still handed out to ETH stackers, but in smaller amounts.
Validator nodes that propose and validate new blocks in the chain, receive rewards for each block they successfully add to the chain. These rewards are then distributed between individual ETH stakeholders who delegate their ETH validator. It is because of this situation that we can say that Staking ethera has become the new norm.
Although these rewards are smaller, compared to what was broadcast so that miners could enforce validity – the cost of access to rewards is small, if we compare it with the cost of performing a mining operation. This makes it easier to participate in the process as well as receive rewards.
Currently, the best bet rewards are earned if validators are found to increase their rewards using maximum drawn value methods (Eng. maximum extracted value (MEV).
Certainly, the current differences in block rewards and stakeholder yields are likely to decrease over time, as more validators adopt blocks that have amplified the MEV method (for the purpose of receiving higher rewards.
Predictions are that rewards will go down, and that investors should still benefit, if they invest with validators using MEV.
The future of Ethereum: What after the merger?
Regardless of all the uncertainties, changes and anticipations brought by the merger, it represents an ambitious venture, and demonstrates the skills of developers who contributed to the development of the code, but also to the very vision of Ethereum.
Currently, ETH validators include other sources of income in rewards paid to stackers, and ETH stackers are seeing higher growth. Certainly, we haven’t yet seen how eth’s supply reduction will be reflected in the real world. Some predictions suggest that we can expect Deflation of ETH, once activity on the main grid starts to rise again, and once the price of gas rises continues.
Be that as it may, we are in for an exciting period to say the least, and the shocks caused by the shortage – will bring a new dynamic to the crypto market that could cause the price of ETH to rise.
Ready, set, now! After Merge, Surge, Verge, Purge and Splurge are also arriving
In the end, it should be emphasized that Merge is just one of the planned upgrades that leads to greater scalability of the Ethereum network, and the current upgrade potential is only at 40%. It is believed that the Ethereum network will reach its full potential in the next two years, and according to the co-founder of Ethereum – Vitalik Buterin – after Merge , Surge, Verge, Purge and Splurge will also arrive!
Currently, ETH can process 15-20 transactions per second, and the ultimate goal is to reach a speed of 100,000 transactions per second – once all announced upgrades are successfully implemented.
Finally, let’s repeat that Merge has marked the merger of the Ethereum mainnet or tiga of the main network with the new Proof-of-Stake Beacon Chain; and that the main goal was to achieve faster and cheaper transactions that would open up the possibility for new upgrades.
We will wait until the next upgrade, which is not possible at this time due to lack of ether, and you continue to follow and read us. Share your comments and questions with us via email or social media!
Until the next upgrade,
Kriptomat Team
