The mysterious Merge and what it all means for cryptocurrencies and NFTs
The Merge has finally happened! This long-awaited and highly significant upgrade to the Ethereum blockchain promises to reduce its carbon footprint to less than 1% of current levels. Since Ethereum is the primary ecosystem supporting smart contracts, NFTs and decentralised finance (DeFi) apps, this will go a long way towards the overall decarbonisation of blockchain as a technology.
Historically, many blockchains (including ‘OGs’ Bitcoin and Ethereum) have been secured by ‘proof of work’. POW is a deliberately wasteful process, designed to protect the public, transparent and decentralised nature of a blockchain by deterring control from being concentrated in too few hands. However, it is hugely controversial on account of its colossal appetite for both hardware and energy, and has been vehemently criticised on environmental and economic grounds.
Ethereum has therefore transitioned to an alternative system: ‘proof of stake’. This relies on operators staking significant amounts of cryptocurrency as a guarantee of their bona fides and trustworthiness. These operators are then rewarded for helping to maintain the blockchain, but risk losing their stake if they are found to be acting maliciously or falsely. ‘Proof of stake’ does not require the enormous level of computational processing which underpins POW and so is much less energy-intensive.
Because Ethereum operates on consensus, with no centralised authority, arriving at the Merge has taken years of complex negotiation and planning between a vast number of organisations and individuals. Careful testing has taken place and, although some concerns remain, the switch has been made.
Will there be a noticeable difference post-Merge? Transaction speeds are actually unlikely to change much, but transaction fees should drop considerably, as will Ethereum’s impact on the world around us. As a side benefit, since specialised POW mining computers are built with the same processing units as dedicated games machines, video game enthusiasts can also look forward to an easier time getting hold of their favourite tech!