What’s all the fuss about the Ethereum Merge?

Cryptocurrencies received some horrendous coverage when people began to question their green credentials. It was Elon Musk who brought this to the attention of the masses. Having initially allowed bitcoin to be used to buy his Tesla cars, he reversed this decision after realising the environmental impact of Bitcoin mining. 

As the second clarets cryptocurrency in the world, Ethereum is set to make a change. This change will lead to its carbon emissions being slashed by as much as 99%. That can only be good news for everyone involved and the planet as a whole. 

The process of change is being referred to as ‘the Merge’ and it sees the blockchain technology being upgraded so that it moves away from the model used by Bitcoin, which is set to remain environmentally unfriendly.  This upgrade to Ethereum is leading governments around the globe to question whether further regulation for crypto is required, and investors fear that more legislation would lead to crypto becoming a heavily regulated industry. much like the gambling industry and PayPal casinos.

With the Merge fast approaching, the value of Ether (the Ethereum token) has doubled. Why is the Merge causing such interest and does this upgrade pose a  threat to the popularity of Bitcoin and other cryptos? That’s what we’re about to explore.

What is the Merge and when is it set to happen?

The Merge update has been split into two parts. The first of these began on 6th September 2022 with the Bellatrix upgrade. This will mark a so-called ‘hard fork’ which acts to change Ethereum from a proof-of-work (POW) base to a proof-of-stake (POS) instead. POS is already used by Cardano and its Ada coin, but this hasn’t helped it topple bitcoin, or even get closer to matching the popularity of Ether.

The second part of this upgrade is set to take place from 13th September to the 15th. According to Ethereum, all relevant tests have been carried out and the transformation is good to go. 

Both POW and POS are mechanisms used to add new blocks to the chain and to confirm transactions. While they have the same purpose, they work in different ways. While POW is an energy-intensive process, that isn’t the case with POS and that’s what makes it quite so attractive.

Here’s a look at how both systems work:

POW System

This is a system that can be compared to a numerical guessing game that becomes extremely competitive. Whoever solves the puzzle that has been presented first is rewarded with a set amount of crypto. Its set-up means that there is a need for a global network of completes all running at the same time. This is why so much energy is required.

POS System 

With this system, the energy-draining hardware is done away with. Coins are put up as collateral in the staking process before a random selection is made through the software. The power of your machine has no bearing on your chances of winning so there is no incentive to use more and more energy.

So, does the Merge mean that crypto will be greener?

In its current form, it’s estimated that Ethereum mining uses around 72 terawatt-hours of energy every year. This is the equivalent to the carbon footprint of the whole of Switzerland. when you bear this in mind then there is little denying that the upcoming changes are certainly a step in the right direction.

Those behind Ethereum believe that the upgrade will see as much as 99% of energy consumption being cut. That means that it will be saving electricity consumption that is equal to a country such as Portugal. While this is great news, it doesn’t achieve perfection by any stretch of the imagination.

The issue is with blockchain technology itself. While POS reduces consumption the truth of the matter is that blockchain tech was just never designed to be super energy efficient. If you take a look at Paris, as an example, it has voiced a desire to ban crypto mining stating that while this continues the climate change goals can never be met. While, as a city, it may welcome a move to POS you can be sure that there will be a great deal of scrutiny cast over the Merge when it’s completed.

Is the Merge really a split?

The name Merge may be described as a little misleading. The name was chosen because of the fact that Ethereum is adopting the Beacon Chain POS system, but the reality is that this will lead to more of a split as there will be the creation of a POS chain alongside the POW one. While this fork can be considered good news, it’s not a first in the world of crypto. Bitcoin has also had splits after upgrades and these are what has led to the likes of Bitcoin cash and Bitcoin Gold.

There is always the possibility of the POW chain becoming redundant. If the POS system takes off and forces prices high, those over on POW will fall and miners will simply shut down. These miners, who have invested heavily in expensive machines, will simply take these and start to mine other cryptocurrencies.

Will Ether topple Bitcoin?

While there is no getting away from the fact that people are hungry for greener alternatives, that’s not to say that Ether will suddenly become the biggest cryptocurrency. The thing is that Bitcoin will always be the original crypto and that means that investors will always hold a special sort of affection for it.

Beyond the affection, Bitcoin has been the first to break into the mainstream and show practical uses. With household names investing in the coin, there is little chance that people will suddenly abandon it. However, what Ethereum has done is put pressure on Bitcoin. It has shown how an upgrade can have a monumental impact and there may be those who are questioning why Bitcoin isn’t doing the same. 

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