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Crypto Weekly
stake model. To validate transactions and create new coins, Ethereum is currently based on what is known as proof-of-work, which requires miners to solve complex puzzles. Computer power is required for this process, and it is often criticized for its environmental impact. With the planned upgrade, Ethereum will switch to proof-of-stake, which would allow users to validate transactions according to how many coins they stake. For the validation of transactions on the network, users can earn rewards by staking more coins. Ethereum will undergo a proof-of-stake transition as a result of the Merge, according to David Lawant, director of research at Bitwise Asset Management. A crypto network must decide how it decides who gets to propose new blocks of transactions that will be validated and added to the blockchain by all participants.
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espite reports that the world's most popular blockchain is in the midst of a massive upgrade that will change its infrastructure and make it more energy-efficient, some misconceptions are circulating that investors should be aware of. With the "merge," Ethereum plans to move from a proof-of-work to a proof-of-stake model (more on that later). By merging, Ethereum will become more scalable, secure, and sustainable. Crypto mining for Ethereum will become obsolete, reducing its environmental impact; the supply of Ether will decline as fewer coins are issued; blockchain security against potential attacks should improve; and institutional investment in Ethereum will grow.
'New' Ethereum tokens won't be created by the merge Following the merge, there is a big misconception that Ethereum will have a "new" token. According to Ethereum developer Tim Beiko, this is not true. There will be no change to Ethereum's
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cryptocurrency, Ether (ETH) Ethereum 2.0 was once referred to as "Ethereum 2." However, the Ethereum Foundation and the blockchain's core developers announced in January that this labeling would be phased out, as scammers had been trying to convince users that a new "Eth2" token would replace ETH. The Ethereum Foundation reported that malicious actors have tried to trick users into exchanging their ETH for "ETH2" tokens or that they must migrate their ETH before the upgrade by using the Eth2 misnomer. Beiko suggests investors remain wary of any promises of free tokens or airdrops relating to the merger from outsiders.
Ethereum currently has both a proof-ofwork and a proof-of-stake chain running at the same time. The proof-of-work chain is currently the only one that processes transactions for users. Both chains have validators. Upon completion of the merge, Ethereum's blockchain will switch to the Beacon Chain, a proof-of-stake chain, and mining will become obsolete. Depending on how crowded a network is, this structure change might cause the price of "gas fees" to decrease, as these fees can sometimes add hundreds of dollars to the cost of processing Ether transactions. However, Beiko said, that's not going to happen.
Ethereum's fees will not be lowered by the merger The merger will lower Ethereum's "gas fees," or transaction fees, is another misconception. According to Beiko, this is also incorrect. As a result of the merge, Ethereum will shift from a proof-of-work model to a proof-of-
April 2022 | Volume 21
