The Ethereum network has shifted from Proof-of-Work (PoW) to Proof-of-Stake (PoS) model today. The Merge is expected to reduce energy consumption on the network by 99 per cent and result in a 90 per cent net drop in annual issuance of ETH, according to experts. For ETH holders, as the Merge is successful, the crypto they now hold is powered by a different mechanism.
“The ETH Merge has now been successful and the chain has moved to PoS (Proof-of-Stake). Big day for everyone who was working on the Merge as we see everything smooth post one of the highest financial events in the history of crypto. As the chain will now run on locked ETH, the net amount of ETH in supply/circulation is decreasing and we should see that getting priced in the times to come,” said Minal Thukral, Executive Vice-President, Growth and Strategy, CoinDCX.
Under PoW, by solving complex mathematical calculations, a miner adds a block to the blockchain but under PoS a user requires 32 ETH to be staked to become a validator. Ethereum now has completely shifted from PoW to PoS.
“Ethereum Merge is a pivot of unprecedented scale and complexity in the crypto ecosystem. Ethereum's successful transition to a greener and energy-efficient blockchain will, in the long term, lead to the greater adoption of the technology,” said Ashish Singhal, Co-founder and CEO, CoinSwitch.
Ethereum today is the second largest cryptocurrency in terms of market cap and has the highest adoption among developers and DeFi projects—it is the primary infrastructure layer of Web3. Singhal adds, “For greater adoption of blockchain among enterprises, the energy consumption needs to be drastically reduced as businesses are striving for carbon neutrality. This is precisely what the Merge will achieve. It is estimated that the transition to Proof-of-stake would reduce the energy consumption of Ethereum by 99%. The Merge, therefore, is significant not just due to the technical complexities involved. It could well be the catalyst for the greater adoption of the technology.”
Experts say while the Merge will change the consensus mechanism, it will not increase the capacity of the Ethereum network. “The Merge may lead to forked chains similar to Ethereum Classic (ETC) that split from Ethereum in 2016,” said Vikram Subburaj, CEO, Giottus Crypto Platform.
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