While the crypto industry becomes increasingly mainstream with each passing year, its volatility remains constant. One can never be sure how crypto trends change and new technologies emerge to render the previous-gen tech basically useless. Something similar has now happened with the Ethereum Merge.
Being simply regarded as the ‘Merge’ in crypto, Ethereum has moved away from the ‘Proof of Work’ trust model to a ‘Proof of Stake’ work model. The unversed need not get confused with such concepts as we’re here to explain to them in easy terms.
‘Proof of Work’ model
Earlier, Ethereum used to work on the ‘Proof of Work’ which basically meant that all the Ethereum transactions/ownerships were validated by the work of crypto-miners. Cryptocurrency mining is a process that verifies and adds new transactions to a cryptocurrency using a complex global network of computers. The miners ensure that the transactions are added correctly and are legitimate. The PoW model has long been criticized as it requires a complex chain of computers having stacked banks of graphic cards juicing up on an outrageous supply of electricity. The energy-intensive model of crypto mining is known to consume energy higher than in some countries! The Merge is expected to cut down electricity consumption related to mining by 99%.
‘Proof of Stake’ model
In this model, any crypto investor who stakes a minimum of 32 Ether tokens can become a validator. This translates to a group of validators getting selected to mine crypto in a far less energy-consuming process. Users will also have an option to create a ‘Stake pool’ to participate with a smaller stake.
Crypto enthusiasts should note that while the new mining mechanism is more energy-efficient, it does not necessarily make ETH transactions any quicker. According to Ethereum Foundation, the Proof of Stake method only increases the productivity speed by 10%. However, ETH developers do not need to worry as they won’t have to make any changes to their existing code. The technology is designed to be backward compatible, meaning applications built on the previous version will be available with the newer network.