- Why is Ethereum important?
- Problems that the Merge will solve
- So, what is the Ethereum Merge?
- What does the Merge change for an average crypto user?
- What will the Merge actually do for small investors?
The long-awaited update to the Ethereum platform finally took place on September 15. Crypto activists claim it will completely shake up the industry. From now on, Ethereum Merge will be at the center of everything being done around the nascent economy, which aims to become fully decentralized.
Why is Ethereum important?
Ethereum is the 2nd crypto platform after bitcoin. It also has its own token — ether (ETH). According to CoinGecko, it is the world’s second largest cryptocurrency in terms of market value, with a market cap of nearly $195 billion as of this moment. Bitcoin (BTC) is the world’s leading cryptocurrency with a market value of $384.2 billion. BTC and ETH represent more than 51% of the crypto market, valued at $1.03 trillion. Bitcoin has a market share of 44.99%, while Ethereum has a market share of 16.3%.
Ethereum’s main difference is that it is the place where DeFi applications are developed. DeFi provides traditional financial services such as credit, trading, insurance, and others. However, there is a significant difference from traditional banks and financial firms: there are no intermediaries. Ethereum also produces or mints NFTs (non-fungible tokens), which are regarded as the future of art and intellectual property.
Essentially, Ethereum is a kind of fair where everyone can find everything the crypto industry currently offers or is working on.
Problems that the Merge will solve
The first of the problems is that the transaction verification mechanism, which secures the Ethereum ecosystem, consumes a lot of power. This technology, known as proof-of-work (POW), has been heavily criticized by environmentalists. Thus, it prevents big investors from investing money in the crypto industry in the way they would really like to avoid violating the Environmental, Social and Corporate Governance (ESG) framework. Keep in mind that the bitcoin ecosystem also uses the POW technology. The Merge is expected to reduce transaction fees in Ethereum.
It should also make transactions faster and easier. Currently, users have to be very patient when making a transaction in Ethereum.
So, what is the Ethereum Merge?
To put it simply, the Merge is just a way of doing things in a different way. Essentially, instead of using an energy-intensive mechanism, the platform will replace it with an environmentally friendly transaction verification system. So, it will go from proof-of-work to proof-of-stake.
As a result, computers and miners will no longer have to compete in solving complex mathematical problems to win the right to verify a block of transactions and earn ethers in return. In proof-of-stake, validators are assigned from among a group of cryptocurrency owners. Since many computers no longer need to compete for the right to verify transactions, the system’s power consumption will drop dramatically.
The Ethereum Foundation, the group of developers who control the blockchain, estimates that this reduction will be about 99.95%. Validators will replace miners.
What does the Merge change for an average crypto user?
At the moment, the Merge changes nothing for small investors because this software update will not increase the number of transactions that can be executed per second. As developers predict, it will happen much later. According to the Ethereum Foundation, with proof-of-stake, blocks of verified transactions will be made about 10 percent more often than with proof-of-work.
“This is a fairly minor change and is unlikely to be noticed by users. The finality may offer additional security safeguards, but it will not significantly speed up transactions,” the Foundation said.
The Merge will not make transactions cheaper, either.
“The Merge is a change of consensus mechanism, not an expansion of network capacity, and will not result in lower gas fees,” Ethereum Foundation stated.
What will the Merge actually do for small investors?
For now, this event, which crypto enthusiasts have been anticipating for months, accomplishes two things only for ordinary users. It will give a clear conscience to those who say they are worried about the environment and who have been at odds with their values by investing in crypto. Now they can align their values and investments. In essence, the Merge brings wokism and political correctness to the crypto industry.
The Merge could also allow those who own ether to see an increase in the value of their portfolio, because if the update goes well, it is likely that ether prices, which have risen more than 51% since the start of the third quarter, will continue to rise.
