The Ethereum switch to proof-of-stake is inching closer every day. If there are no further delays, the final merge will take place in September 2022. This will mark a milestone where proof-of-work and mining disappear from the Ethereum network.
Many in the crypto space consider Ethereum’s merge as one of the most important events in blockchain history. The switch to PoS will turn the #1 smart contract platform into a more sustainable, scalable ecosystem, ready for mass usage.
But what does this exactly mean for the userbase and the miners? How important is this merge and what does it entail for Ethereum’s future? In this article, we will try to provide answers to these questions and explain the details behind this event.
What Is Proof of Stake and Why Does Ethereum Need It?
Until now, Ethereum has been functioning on a proof-of-work consensus mechanism. In this system, miners compete to solve increasingly complicated mathematical puzzles to reach a consensus on the network. Through this, they validate the blocks on the blockchain and create new ether tokens, which are distributed as a reward to the miners.
This puzzle-solving mechanism has two major drawbacks:
- As more users join the network, the network needs more energy to create blocks. Critics have been using this high energy usage as a weapon against Ethereum. During a time of energy crisis like we are experiencing, many consider it wasteful to use electricity for creating NFTs or playing blockchain games.
- The current system only provides 15 transactions per second. This couldn’t possibly accommodate the mass usage for which the network was created. With the adoption of DeFi, NFTs, blockchain games, and metaverses, Ethereum would require tens of thousands of transactions per second to be sustainable.
Fortunately, the proof-of-stake model will provide the much-needed scalability and increase in speed of the network. Moreover, in PoS, validators don’t require powerful hardware and will consume 99% less electricity for validating blocks. In conclusion, PoS is going to make Ethereum a more scalable and eco-friendly blockchain, ready to accept the mass adoption of tech by the mainstream consumer.
Ethereum’s Roadmap of Transition
Ethereum’s switch to PoS is only one step toward an even more important goal of hyper scalability and interoperability. Until now, the devs have deployed the beacon chain, which is the main Ethereum blockchain that will run on PoS.
In the near future, the PoS blockchain will implement the concept of sharding. In this concept, parallel blockchains will coexist with the beacon chain and alleviate the computational weight from it. These app chains will run specific applications, making the network even faster (linear scalability) and cost-effective.
At the same time, Ethereum will use shared security of the beacon chain, where all the stakers will secure the main chain and the sharded chains. The sharding feature will be deployed in multiple phases and will take place sometime in 2023.
Should Users and Miners Be Worried?
While this move to PoS is a boon for users of the chain, this is not always true for the miners. These entities have invested huge amounts of capital in mining equipment. As of September 2022, they will have the choice to either switch to mining another cryptocurrency, for example, shift from ETH to BTC, or sell their hardware.
Many miners aren’t happy with this ultimatum and are pushing towards a state fork of the Ethereum blockchain. This means that, if a sufficient number of miners support the fork, a PoW ETH token will coexist with the PoS ETH token. While this outcome seems inevitable now, very few exchanges and projects have expressed their support of the PoW fork of Ethereum.
Crypto experts are warning against this fork as well, as the PoW version will be most likely not followed by a majority of the community. This could lead to security issues and a lack of support from developers.
Do Pros Outweigh the Cons?
So, what is the final word here? All the facts point out that the merge will be beneficial to both users and the network as a whole. Ethereum will consume much less energy. Moreover, it will be one step in the right direction towards scalability and the creation of a genuine internet of blockchains. While the merge might need some time to get everything in line, it will ultimately set Ethereum to be future-proof and become the cornerstone of the new web3 paradigm.