The highly anticipated Ethereum merge has finally happened, but what does it mean for the crypto ecosystem moving forward? There has been talk amongst those in the industry that the shift could revolutionise this space and open doors to new investors, whereas others have predicted price hikes alongside greater crypto stability for the future. So, what does this mean in reality?
Contents
- What is the Ethereum merge?
- What is proof-of-stake?
- The Ethereum merge: what’s the point?
- What it means for Ethereum holders
- What happened to Eth 2?
- What will happen to Ethereum in 2022?
What is the Ethereum merge?
The Ethereum merge brought the crypto’s two layering systems together, replacing proof-of-work with proof-of-stake, on September 15th, 2022.
The proof-of-work layer was named the Mainnet, or Ethereum Mainnet. Like other traditional crypto set-ups, the Mainnet required electricity-quaffing mining to locate and extract coins. The proof-of-state Beacon Chain now houses any accounts, contracts and blockchain formerly used on the Mainnet.
Ethereum’s founders believe the new system will be up to 99.95% less energy-intensive whilst being just as secure and reliable. In short, the new proof-of-stake approach is a modern system that’s far more in keeping with the needs and current capabilities of Ethereum in 2022.
What is proof-of-stake?
Proof-of-stake was initially launched in 2020 as an alternative to the Mainnet. Instead of having to prove capital by expending energy, owners can stake their ETH into a smart contract on Ethereum, which then acts as collateral. The shift has occurred after two years of stringent testing, and all Mainnet history will transfer automatically to the proof-of-stake system.
The Ethereum merge: what's the point?
The issue of energy-intensive mining has been a constant negative when it comes to the long-term future of cryptocurrencies. The merge breaks Ethereum away from the likes of the Bitcoin blockchain, cementing the brand as one which has the environment as a primary concern.
Ethereum is very much plotting with the future in mind. In the early days of proof-of-work style-mining, anyone with an internet connection could join in the fun. But as coins have been snapped up over time by the likes of the Bitcoin blockchain, mining has become too energy-intensive for the average miner to sustain.
The shift to proof-of-stake opens the network to everyone again, at least in theory. Furthermore, we’ll likely see other aspects of the brand become more efficient, as well as future Ethereum pathways that, at present, only the brand is aware of. If you’re interested in crypto but haven’t made the leap towards investment yet, listen to our podcast on Getting into Crypto Early. It’s never too late!
What it means for Ethereum holders
Existing holders of Ethereum need not worry – nor do anything at all. Funds, wallets, and currency remain precisely the same as before, and nothing will be lost. Should you receive any contact from anyone purporting to be a crypto expert, telling you to make changes to your account, be extremely wary. No changes are necessary, so you may be communicating with a potential scammer. Double-check any direct communication from the likes of your crypto wallet, just to be safe.
The only real change at present is an environmental one. Those with a social conscious no longer have to mine with a heavy heart. And – when compared to many other crypto-mining models, Ethereum could well gain a future reputation as being a ‘green’ investment. This could be an important point-of-difference between Ethereum and its rivals, given that climate-related issues are unlikely to be solved anytime soon.
Software engineers looking to transfer their skills into the crypto market can find out more by reading our article on The Move from Traditional Finance to Crypto/Blockchain.
What happened to Eth 2?
The terms ‘ETH 1’ and ‘ETH 2’ relate to the pre-merge days. Each form of ETH was identical to the other – the numbers were merely to distinguish between mining networks. Now that the Mainnet has been discontinued, numbered ETH is also obsolete. One chain means one ETH.
What will happen to Ethereum in 2022?
The Ethereum merge will have little impact on Ethereum as we know it. Everything will continue as normal, except for the new proof-of-stake layer system. The Beacon Chain will no doubt enable Ethereum to introduce new facets to its model in future, but as yet, these are unconfirmed.
Price-wise, crypto-predictions are only made by the very brave. So, let’s take a look at what the experts are saying. Bloomberg has predicted an end-of-year rise to $4,000 – $5,000. Coinpedia reckons a rise of between $6,500 and $7,500 is possible, although they’ve recently reassessed this figure to a more conservative $2,500.
Is it all good news? Well, not exactly – that wouldn’t be crypto as we know it. Other analysts have predicted a crash as low as $500. Given the volatility of the market, it’s no surprise that the experts have come to such wide-ranging conclusions. If anyone knew for sure, we could all get rich overnight.
Perhaps the best prediction for what will happen to Ethereum in 2022 – and beyond – is that its future may partly depend on what other cryptos do. Should the other leading players remain on a proof-of-work layer system, Ethereum keeps the environmentally friendly upper hand. But should others ape the Beacon Chain, there’ll be much more of a level playing field.
For now, Ethereum has the answer to any anti-crypto-mining commentator, and the proof-of-stake system makes it the perfect choice for any environmentally conscious investor. But in a market that remains immensely volatile and ultimately unpredictable, its real impact will only be seen in the long run.
Faq's
The transition from proof-of-work to proof-of-stake as part of the Ethereum merge is expected to positively impact the scalability and transaction throughput of the Ethereum network. Proof-of-stake is designed to be more energy-efficient and allows for faster transaction processing compared to proof-of-work. With proof-of-stake, the Ethereum network can potentially handle a more significant number of transactions per second, making it more scalable and capable of accommodating increased user demand and activity without experiencing congestion issues.
The shift towards proof-of-stake affects individuals currently engaged in Ethereum mining operations. Proof-of-stake eliminates the need for energy-intensive mining rigs and allows users to stake their ETH as collateral to validate transactions and secure the network. Miners who previously relied on proof-of-work mining may need to adapt their strategies or explore alternative opportunities within the crypto ecosystem. Some miners may transition to staking ETH or participate in other blockchain networks that still utilise proof-of-work consensus mechanisms.
While the Ethereum merge brings environmental benefits and potential for broader accessibility, there are also challenges and risks associated with implementing proof-of-stake. One concern is the network’s security, as proof-of-stake introduces different attack vectors compared to proof-of-work. Additionally, there may be concerns about centralisation if a small number of entities accumulate a significant portion of staked ETH, potentially compromising the network’s decentralisation. Ethereum developers and the community are actively working to address these concerns through ongoing research, testing, and protocol upgrades to ensure the security and integrity of the Ethereum network in the transition to proof-of-stake.
