The Merge Explained

The Merge Explained

The Merge is Ethereum's biggest update since the platform's inception in 2015. Ethereum will transition from the Proof of Work (PoW) system to the Proof of Stake (PoS) mechanism on the Beacon Chain. This move is now fully supported by NodeReal. Here’s what this means for you and why you should care.

Before we move on to what the Merge means, it is important to understand some foundation.


What is a Proof of Work (PoW) system?

Let's look at the history of proof of work to better comprehend it.  Cynthia Dwork and Moni Naor developed the original concept that is now known as proof of work in 1992 with the main purpose to prevent ‘spam.' According to Dwork and Naor's approach, email recipients would only process emails that were accompanied by evidence that the sender had completed some minimal computing work, hence the term "proof of work."

On a standard computer, the computation of the proof can take a few seconds. Regular users would therefore have little to no trouble, however, a spammer intending to send a million emails would need several weeks using the same hardware.

In Cryptocurrencies, PoW is shown through the solving of mathematical puzzles in exchange for a reward in that specific cryptocurrency the user is trying to mine.

What is a Proof of Stake (PoS)?

In a proof of stake system, staking serves a similar function to proof of work’s mining, in that it’s the process by which a network participant gets selected to add the latest batch of transactions to the blockchain and earn some crypto in exchange.

The exact details vary by project, but in general proof of stake blockchains employ a network of “validators” who contribute — or “stake” — their own crypto in exchange for a chance of getting to validate new transaction, update the blockchain, and earn a reward

To summarise, proof of work involves miners competing to validate transactions and solve cryptographic conundrums in order to receive block rewards. Proof of stake uses randomly selected validators to ensure that the transaction is trustworthy and pays them with cryptocurrency in exchange.


The ‘Merge’ itself and how is it happening?

Imagine two trains moving parallel to one another to help you understand the merge. The Mainnet and Beacon Chain are the names of the two trains, respectively. We currently employ a Proof of Work approach with the mainnet as our executing layer. The new proof of stake consensus layer is the Beacon Chain. When these two trains merge onto one track, it will signify The Merge.

It's important to remember that initially, the Beacon Chain shipped separately from Mainnet. While the Beacon Chain operates concurrently with proof-of-stake, the Ethereum Mainnet, with all of its accounts, balances, smart contracts, and blockchain information, continues to be secured by proof-of-work. When these two systems eventually converge at the next Merge, proof-of-stake will completely replace proof-of-work.


Still not clear why the merge is occurring? Here’s a brief breakdown of what you can expect once Ethereum merges towards a Proof of Stake model.

Proof-of-stake was added to Ethereum through the Beacon Chain. This is a fresh approach for investors to support the security of Ethereum. Consider it a public benefit that will improve Ethereum's health while also increasing your ETH earnings. In practise, staking involves you staking ETH in order to activate the validator software. You will operate node software as a staker, processing transactions and adding new blocks to the chain.

Mining has a similar goal to staking, but staking is very different from mining. Mining necessitates significant upfront costs for powerful hardware and energy use, which encourages centralization and economies of scale. Additionally, there is no necessity to lock up assets as collateral with mining, which restricts the protocol's ability to punish attackers.

Ethereum will become substantially more safe and decentralised when it switches to proof-of-stake. The network grows increasingly decentralised and secure against attacks as inevitably more users join it.





Author  - Sahil Rey Chandnani



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