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Source: The post is based on the article “The significance of Ethereum Merge and its impact on blockchain architecture” published in Indian Express on 17th September 2022.
What is the News?
Ethereum blockchain platform fully transitioned from ‘proof of work’ to a ‘proof-of-stake’ consensus mechanism and this revamp is known as the Merge.
What is Etherum?
Ethereum is a decentralized cryptocurrency, meaning that it does not have institutions like banks approving the transactions that happen on its network.
The approvals happen under the Proof of Work(PoW) consensus mechanism which was essentially done by miners.
Under it, the miners would compete to solve complex mathematical puzzles using a massive infrastructure of cutting-edge computer hardware, and the first one to solve the puzzle would be chosen as the validator.
This method was almost entirely dependent on crypto farms which are massive warehouses lined with rows of computers which would solve the puzzles.
What are the issues with this mechanism?
These mining farms were energy guzzlers and they sometimes consumed more electricity than entire countries and were, therefore, a big concern in terms of environmental sustainability.
For instance, the crypto’s total annualized power consumption nearly matches that of Finland, while its carbon footprint is comparable to Switzerland.
What has changed now?
Etherum has decided to set aside the need for crypto miners and gigantic mining farms which had previously driven the blockchain under a mechanism called ‘proof-of-work’ (PoW).
Instead, it has now shifted to a ‘proof-of-stake’ (PoS) mechanism that assigns ‘validators’ randomly to approve transactions and earn a small reward.
How is the new method significant?
1) It would entirely eliminate the need for miners on the Ethereum network, 2) It will reduce Ethereum’s energy consumption by nearly 99.95%, and 3) It will make transactions on the Ethereum network extremely secure.