Ethereum 2.0: the merger is complete

The moment the crypto space has been waiting for years has arrived: Ethereum moved its consensus process from Proof of Work to Proof of Stake at 8:44 a.m. – and thus made history. Never before has a blockchain been switched to another consensus process on the fly. The Herculean task is accomplished: a new era begins for Ethereum.

The moment that changed Ethereum forever:

Ethereum 2.0: what changes now

The move to Proof of Stake marks a turning point for Ethereum, ushering in a series of changes. Energy-intensive mining will be phased out as a legacy – going forward, the network will be secured by validators and their ether deposits, the stake.

As a result, the blockchain saves almost all previous energy needs, as Uli Gallersdörfer, CEO of the Crypto Carbon Ratings Institute, confirms to BTC-ECHO: “Merger reduces CO2 emissions by more than 99.99 %. Not only Ethereum itself, but also other Ethereum-based solutions are becoming much more sustainable.”

As the largest smart contract platform, on which the majority of decentralized financial services (DeFi) and NFT exchanges take place, the vastly improved energy efficiency of the Ethereum blockchain contributes to the decarbonization of the entire world. crypto sector. Essentially Ethereum-based Web3 development will get a green coat of paint – which should also help with wider adoption of blockchain technology.

Proof of Stake limits Ether replenishment

Proof of Stake also reduces the inflation rate, i.e. the distribution of new ethers. At Proof of Work, the amount of circulation has been increased by 13,000 ETH per day in the form of mining rewards. The staking rewards, on the other hand, only amount to 1,600 ETH per day. This means that the amount of newly added ether is reduced by 90%.

Since the London Hard Fork, ether transaction fees have also been destroyed, i.e. permanently removed from the amount in circulation, the cryptocurrency could tip into deflation if demand is strong: more ethers are destroyed than there are products. The strangled supply of new ethers would therefore have positive effects on price developments.

Blockchain doping

Finally, the merger serves as a precursor to upcoming scaling solutions that ensure higher blockchain throughput. So far it has been around 15 transactions per second, which leads to high transaction fees and latency.

With the change in consensus, the integration of scaling boosters – the so-called Layer 2 solutions – is gradually starting, with which the performance must be increased to several thousand transactions per second and the gas costs must be maintained down. Most of the work on this should be completed in the coming year.

BTC-ECHO reports on the merger throughout the day and keeps you updated on the latest developments. Here you will find all important articles about the Ethereum merger.

In the August issue of BTC-ECHO Magazine, we also covered Ethereum, the merger and its implications for the crypto ecosystem in the cover story. Go here to browse.