What Has Changed After the Ethereum Merger?

Jay Crypto

Blogger

The second-largest crypto network has gone through a major transformation in the last month. On September 15, The Merge launched on the Ethereum mainnet and it was successfully integrated. The Ethereum Merger has made several changes to the Ethereum blockchain. We will explore what has changed in the Ethereum Network. We will start with a brief introduction of the Merge. 

What is Ethereum Merge?

 The Merger was the union between Ethereum's initial operational layer (the Mainnet, which has lasted since its inception) with its latest proof-of-stake validation layer, the Beacon Chain. It removed the requirement for energy-intensive processing and allowed the network to be maintained with staked ETH. It was a thrilling step toward attaining the Ethereum vision of increased scalability, safety, and stability.

Source: Ethereum.org

Originally, the Beacon Chain was running independently of Mainnet. The Ethereum Mainnet, comprising all of its users, assets, smart contracts, and network data, remained PoW protected, even as the Beacon Chain functioned simultaneously utilizing proof-of-stake. When these two systems finally combined, proof-of-work was completely overtaken by proof-of-stake.

Assume Ethereum is a starship that was launched before it was fully prepared for interplanetary travel. The community used the Beacon Chain to construct a new reactor and a stronger vessel. After extensive testing, it was decided to switch to the better engine for the old one mid-flight. The new, more effective engine was installed in the existing spacecraft, allowing it to put in some significant light years and take on the universe.

What has Changed?

Let’s explore what has changed since the launch of the Ethereum Merger:

Energy Consumption of Ethereum 

Ethereum operations no longer demand the deployment of massive computational power ("proof of work"). Instead, it now verifies payments using a method known as "proof of stake." If you have enough Ether (ETH), you can "stake" it and enter a group of individuals who authenticate payments uploaded to the blockchain collaboratively. 

Staking utilizes significantly fewer resources than proof-of-work consensus blockchains because it consumes far less computer power. This reduces its carbon emissions and makes it more energy efficient. Ethereum's founder has claimed that this transition will reduce worldwide energy consumption by 0.2%. 

Source: Finbold

Firms that have been hesitant to engage in virtual currencies due to ESG standards or environmental problems may find these smaller carbon emissions appealing. When measured against an overarching blockchain sustainability framework, the Merge adjustments are a major step toward more eco-friendly chain operations and digital asset strategy.

Transaction Security 

Proof of work (as formerly utilized by Ethereum) maintained security level in parts by requiring users to commit vast and expensive computational resources to verify payments. Security is different in the post-Merge Ethereum since it is proof of stake.

To conduct business, Ether holders now must "stake" their money. A bad actor would need to own and stake a majority of all staked ETH for the network to approve a false transaction. If  the scam is discovered, the attackers will lose all of the Ether that they have staked. This shift in validation methodology may inspire a larger approach to managing digital asset risks for some businesses.

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 Vitalik Buterin has also claimed that the PoS chain is more secure than PoW. He has discussed this topic in one of its blogs. He compared the cost of attacks on both chains and concluded that the PoS chain will cost attackers more.  One of the Ethereum developers tweeted this and made the same claim.  

Participation Has Changed

One essential factor has improved if you want to engage in transaction validation. You still require some practical understanding, and buying and staking Ether is an investment, but you no longer require highly technical devices and a team of experts. 

Your technical requirements are just a low-powered computer (a consumer laptop would suffice) and dependable internet access, though you should be familiar enough with blockchain processes to be a successful validator. This alteration may have consequences other than perhaps boosting the number of people involved.

 As the first investment is now centered on a straight investment capital rather than equipment expenses, we may see different actors owning and staking Ether to validate transactions. Firms may want to keep track of who holds staked Ether since ownership concentration allows only a few people to determine legitimacy. This could introduce new security vulnerabilities.

Staking

If you decide to stake your Ethereum assets to verify other users' operations in the post-Merge Ethereum, you will gain additional ETH in reward. This is in contrast to proof-of-work blockchain systems, in which you obtain cryptocurrency in exchange for contributing your computational resources. It's similar to how bonds function in certain ways: 

You earn a significant financial profit from your investment, and the Ethereum network ultimately guarantees that return. As the Ethereum network matures, this yield may become more reliable and serve as a standard for other financial instruments in the Ethereum platform.

The Vivek Venture, one of the Ethereum  Merger developers, has claimed that staking rewards will increase by more than 50%. He shared the image below and stated that staking gains are likely to increase by more than 50%.  

    Twitter

A new stream of dividends and capital gains can bring with it new threats, regulatory obligations, and tax liabilities. If you select this path, make sure you have the resources, expertise, procedures, and protocols in place to assist mitigate critical risks (such as fraud) and ensure compliance with all regulations and tax laws.

Ethereum Issuance 

The Ethereum Merger has altered Ether's "tokenomics" – how it operates economically, including how it is generated, allocated, and eliminated from circulation. Earlier, Ethereum awarded a large quantity of fresh Ether to compensate miners that validated transactions. It subsequently "destroyed" some of the Ether it had collected as transaction costs.

Verification has become less difficult with Ethereum's new proof-of-stake system; therefore the quantity of new Ether distributed to reward this labor is reduced, perhaps keeping the currency relatively stable. With fees beginning to be "burned," if the volume of transactions increases, the quantity of Ether taken from circulation may even surpass the creation.

Ethereum Became Deflationary 

When the Ethereum network was using PoW, the new ethereum issuance rate was high. Each day, 13,000 Ether were given out to miners via proof of work. The Ethereum Foundation has said that when Ethereum converts to proof of stake, this figure will be reduced by 90%. As a result, all stakers will receive 1,600 Ethereum each day.

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As shown in the above image, some people pointed out how the conversion has made the asset deflationary. 

What’s Next? 

The Ethereum Merger could be only the beginning, as more upgrades, including a switch to "sharding," are due in the coming years. This is a method of validating data that could allow for significantly quicker and cheaper transactions. Lower emissions, improved tokenomics, fewer hurdles to entry, a novel approach to safety, and the potential for increased revenue sources might all be incentives for more businesses to utilize Ethereum. 

Some may combine it behind the scenes with products and services. Others may create new business models based on services that are closely related. It is too early to assess the Ethereum Merger's impact. Firms interested in blockchain and digital assets, on the other hand, should thoroughly examine these developments as a significant element of their long-term plans for the modern economy.