In mid-summer, the cryptocurrency community increasingly started to mention The Merge. Many investors expected Ethereum 2.0 to be a breath of fresh air amid a prolonged market decline. Technically, The Merge is Ethereum’s transition from the Proof-of-Work consensus mechanism to Proof-of-Stake.
In other words, you don’t have to spend a lot of computing power to mine the second most capitalised coin. What The Merge is, why it has been awaited and what we can now expect from the release of ETH 2.0 is discussed in this article.
Why The Merge was needed
First of all, why many people wanted Ethereum to switch to Ethereum 2.0 is the new PoS consensus mechanism for the network. It will reduce electricity consumption and environmental damage.
Many environmentalists often protest against mining. That’s understandable, PoW consumes a lot of computer power. For example, mining bitcoin consumes 127 TWh per year. To make it more clear, this is more than electricity consumption for the whole of Norway. And now you can try to imagine what kind of carbon footprint this might leave in the atmosphere.
This is why the PoS consensus mechanism was invented. It doesn’t require any computing power. And there is no usual mining, but in its place is staking.
What is Staking
During a Proof-of-Stake session, users who have Ethereum on their deposit, block a portion of the coins in order to participate in the transaction verification process. In the Proof-of-Stake model, the algorithm chooses which validator will add the next block to the blockchain, based on how much cryptocurrency the validator has zapped. An analogy can be made with the banking system, where a person opens a deposit and gives some amount of money. The profit will depend on the amount deposited, the interest rate and the term of the deposit.
However, for the average investor, it would be quite expensive, because the minimum requirement for staking is 32 ETH. Ethereum is currently worth $1 221 and if a person sends 32 ETH into the blockchain, that means they will freeze $39 000.
However, don’t be too early to get discouraged. Even if you are an individual investor who does not have the ability to freeze almost $40 000 in a single transaction, you can use pools.
Such pools bring together a company of investors to jointly stake a certain cryptocurrency. In this way, they reduce the financial burden, and all the profit that will be in the future, investors will share equally.
If this method doesn’t work for you either, you can always find a cryptocurrency exchange that gives you the opportunity to do Ethereum staking.
How the market has reacted
What The Merge is going to happen has been known for a long time, namely with the advent of Ethereum itself. The fact is that this move was written in detail in the project roadmap, so we can assume that most of those people who are interested in Ethereum and the PoS mechanism have been ready for The Merge for a long time and were just waiting for it to happen.