What is the Ethereum Merge? Why you should care, from efficiency to the environment
The Ethereum Merge has been years in the making. What’s behind the blockchain upgrade? And how will it affect the price, security and energy efficiency of crypto? The Sum has what you need to know.
TO SUM IT UP
- “The Merge” is a software upgrade to the Ethereum blockchain. It has been called “one of the most significant shifts in crypto’s history.”
- Its cryptocurrency is ether, the second-biggest behind Bitcoin.
- The move is supposed to make the infrastructure faster, more energy efficient and more environmentally friendly.
WHAT’S HAPPENING
- With Ethereum’s new “proof-of-stake” system, investors put digital coins into a pool that enters them into a lottery.
- Those investors, called validators, contribute to a “staking pool.” The network picks a winner based on the length of time the ether has been in the pool and the amount.
- The new system could drop the network’s energy usage by more than 99%. It is expected around Sept. 15, but delays have occurred with more possible.
THE BACKGROUND
- Cryptocurrency is a digital asset that uses blockchain as a secure and decentralized “ledger” to confirm transactions. It doesn’t rely on banks or governments.
- Cryptocurrency is purchased through exchanges, which convert traditional currencies to digital versions.
- Computers solve puzzles to confirm transactions in the “proof-of-work” crypto mining process. The energy is comparable to some countries’ yearly emissions.
WHY IT MATTERS
- This lays the framework for future upgrades that could minimize fees to send ether.
- However, Ethereum may become vulnerable to hacks, due to the scale of the change. More than $50 billion in user funds could be at risk.
- The price of ether could crash or rise. Plus, confidence in crypto could grow or fall.
- There could be confusion over where the value of the tokens is.
SOURCES
- New York Times: The Crypto World Can’t Wait for ‘the Merge’
- Forbes: First Phase Of Ethereum Merge, Biggest Thing In Crypto Since Bitcoin, Goes Live
- NerdWallet: Cryptocurrency: What It Is and How It Works
- Time: Why the Ethereum Merge Matters
- Coinbase: What is Ethereum?
READ MORE ABOUT THIS IN THE SUM
The Sum breaks down complex economic issues and how they impact your life in just a few minutes a day. Follow thesum.news on Instagram for the full story.
This story was originally published September 12, 2022 at 2:33 PM.
The Sum
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