merge here.
The long-awaited update to the Ethereum platform – the Internet of Crypto Space – has finally arrived after many years of rumors and preparations.
Crypto evangelists say it will absolutely rock the industry as Ethereum is at the center of everything that is being done around this young economy that wants to be completely decentralized and cut short what is being done today.
Why is Ethereum important?
A simple reminder first: Ethereum is the second crypto platform after Bitcoin. Like Bitcoin, this ecosystem contains a local token known as ether (ETH).
Ether is the second largest cryptocurrency by market capitalization with a market capitalization of $195 billion at the time of writing, according to CoinGecko. Bitcoin (BTC) is the first cryptocurrency with a market capitalization of $384.2 billion. Between them, BTC and ETH account for 56% of the cryptocurrency market, which is currently valued at $1.03 trillion. BTC has a market share of 37.2%, while ETH has a market share of around 19%.
Finally, to better understand what Ethereum stands for, it should simply be said that the platform is where Decentralized Finance (DeFi) applications are developed. DeFi offers classic financial services such as loans, trading, insurance, etc. But there is a big difference with traditional banks and financial firms: there are no middlemen.
On Ethereum, famous non-fungible tokens, or NFTs, which are the future of art and intellectual property, are also being manufactured or minted.
Finally, developers are also working on different uses of blockchain technology.
Basically, Ethereum is a kind of fair where you can find everything that the crypto industry has to offer or work on.
But there are problems.
The problems that the merger will solve
The first of these problems is that the transaction validation mechanism – which ensures the security of the Ethereum ecosystem – is very energy consuming.
Climate activists are highly critical of this proof-of-work system. This therefore prevents large investors from investing as they really want to in the cryptocurrency industry to avoid violating the common acronym ESG – Environmental, Social and Corporate Governance. It should be remembered that the Bitcoin ecosystem also uses Proof of Work.
The merger is also supposed to lower transaction fees on Ethereum, or gas fees according to the insider’s vocabulary.
This same update should also speed up and simplify transactions. Currently, you have to be very patient when making a transaction on Ethereum while it takes a few minutes to complete the process with a Visa, Mastercard or American Express.
So what is merging?
To simplify, merging is just a way of doing things differently. Essentially, instead of continuing to use an energy-intensive mechanism, the platform will replace an eco-friendly transaction verification system. So it will go from Proof of Work to Proof of Stake.
In fact, computers or miners will no longer have to compete through complex mathematical puzzles to win the right to validate a block of operations and earn ether in return.
In proof of stake, auditors are recruited from among a pool of cryptocurrency owners. Since many computers no longer have to compete for the right to verify transactions, the system’s power consumption will be significantly reduced.
That drop would be around 99.95%, according to estimates by the Ethereum Foundation, the group of developers that oversee the blockchain.
Validators replaced miners.
What does or does not change the merge for the average cipher user?
At this exact moment, the merger does not change anything for small investors because this software update will not speed up the number of transactions that can be made per second. (This will come much later, the developers say.)
In fact, with Proof of Stake, blocks of validated transactions will be produced approximately 10% more than Proof of Work, according to the Ethereum Foundation.
“This is a fairly minor change and users are unlikely to notice,” the foundation said. “The endpoint can provide additional security guarantees, but it won’t significantly speed up transactions.”
For those who thought that we would move to a similar or even faster system than transactions with Visa or Mastercard, you will have to wait.
Consolidation also won’t make transactions cheaper.
โThe merger is a change of consensus mechanism, not an expansion of network capacity, and will not lead to lower gas fees,โ the Ethereum Foundation said.
This means that you will continue to pay significant gas fees for applications running on Ethereum. (And there are many.)
But as before the merger, users still have cheaper alternatives such as Solana and Avalanche platforms which are considered โEthereum killersโ.
What will the merger really do for small investors?
At this point, this event that crypto enthusiasts have been talking about for months does only two things for regular users. The merger will give a good conscience to those who say they are somewhat green and who have been contradicting their values โโby investing in cryptocurrencies. They can now juggle their values โโwith their investments. Basically, Merge offers wokism and political correctness to the cryptocurrency industry.
The consolidation could also allow those who own ether to see the value of their portfolio increase because if the update goes well it is likely that ether prices, which are up more than 51% since the start of the third quarter, will continue to increase.
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