As we mentioned throughout the year, Ethereum has been undergoing a series of updates, in a roadmap that will take the network from a Proof of Work (PoW) consensus mechanism to a Proof of Stake (PoS), transition called “Merger” .

With this, the Ethereum network has been following a long calendar of updates, towards a great goal, Ethereum 2.0.

4 months ago, the London Hard Fork (EIP-1559) changed the way miners are paid on the network.

2 months ago, the first update of the Beacon Chain network, called “Altair”.

This entire process eliminates the role of miners in the Ethereum network, as transaction validation will now be performed by the stakers – computers with at least 32 ETH that validate transactions.

4 key changes expected with the transition to the PoS engine

We will have a clearer path to decentralization and scalability: Running a validator on the Beacon chain requires 32 ETH (somewhere around $120,000 currently) today. The high value hinders the scale of the network. By substituting randomness/statistics for hashing power and keeping the block size low, Ethereum allows any user with common hardware to profitably run an Ethereum validator. In addition, the Ethereum network will have the ability to implement other updates (eg, fragmentation), which will reduce transaction costs in the future.

ETH in a deflationary format? According to research by the Ethereum Foundation, the impact that the combination of EIP 1559 and PoS will have on the ETH circulating supply will be from the transaction fee burn combined with lower rewards and ETH blocking for validation, which will reduce the balance of the circulating supply to between 27.3 and 49.5 million ETH (today the offer is close to 118 million).

A new consensus layer – Ethereum’s current execution layer will be moved to the PoS consensus layer and supported by customers who are currently in charge of ETH1. For existing users and app developers this means the interaction with Ethereum will remain very similar after Merge.

Lower energy consumption – Changing the Ethereum consensus layer to PoS eliminates the network of miners and replaces them with validators. Under this format, Ethereum requires miners to compete for the energy of the hash. By using a randomization system to assign the production of blocks, this system is able to work with significantly less energy consumption. The Ethereum Foundation predicts that after fusion, the grid will use at least 99.95% less energy than in its current state.

Conclusion

The merger itself will not initially be as glamorous as many market participants and outsiders may believe. However, the enhancements and the foundation they lay will allow Ethereum to integrate millions of users without sacrificing decentralization.

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