Ethereum’s “Merge” is about to put every ether miner out of work

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In a few weeks, Ethereum will undergo the most significant change in its seven-year history. So far, the Ethereum blockchain has been secured with a method called “proof-of-work”, which consumes more electricity than the entire country of Belgium. Next month’s move to a new method called “proof-of-stake” is expected to reduce Ethereum’s energy consumption by a factor of 1,000.

The stakes are high. A failed transition could spell chaos for the many crypto projects built on top of Ethereum. A smooth transition would be the culmination of years of careful planning by Ethereum’s core developers. Over the past year, developers have repeatedly pushed back the date of “the Merge” to give themselves more time to prepare. They completed a final dress rehearsal on August 10 and cleared the way to make the switch in mid-September.

The most immediate consequence of a successful Merge will be that the world’s Ethereum miners will be out of work. Over the past seven years, thousands of people have bought high-end graphics cards to help maintain the Ethereum blockchain – and earn newly created ether in the process. The new system for updating the Ethereum blockchain doesn’t require the same chunky hardware — or the huge electricity bill that comes with it. So the price of used graphics cards may continue to fall if Ethereum miners leave the industry.

But the move to proof-of-stake is much more than just an energy-saving measure – it’s a major overhaul of the Ethereum network. Ethereum founder Vitalik Buterin believes the merger will lay the groundwork for a series of future upgrades that will allow the network to handle a much larger number of transactions in the coming years. But critics worry that the new scheme could cause the Ethereum network to become too centralized — and thus vulnerable to government regulation.

From proof-of-work to proof-of-stake

At a high level of abstraction, that’s how every blockchain works: someone on the network presents a block with a list of recent transactions. Then other network participants verify that the block follows the rules of the network. If a sufficient number of other network participants accept the block, it becomes the “official” next block in the chain. As long as most network participants are honest, users can rest assured that transactions accepted by a majority of the network will not be deleted or changed later.

The big challenge for any blockchain project is to prevent a malicious party from creating many sock puppet accounts to “fill the ballot box”, drown out the honest participants and thus tamper with previous transactions. Bitcoin’s pseudonymous founder Satoshi Nakamoto’s great insight – the one that made bitcoin possible – was that this problem could be solved using the principle of “one hash, one vote”. On the bitcoin network, whoever has the most computing power, especially the capacity to compute SHA-256 hashes, has the most influence on which blocks are added to the blockchain. As long as honest miners have more hash power than malicious miners, users can have confidence in the integrity of the blockchain – and thus in the integrity of payments made through the bitcoin network. (Check out our in-depth explanation of bitcoin for details on how this works.)

When Vitalik Buterin launched Ethereum in 2015, he used a variation of Nakamoto’s scheme. At that time, bitcoin mining was already dominated by specialized silicon optimized to compute massive numbers of SHA-256 hashes, locking ordinary bitcoiners out of the mining game. So Buterin developed a new mining algorithm designed to be “memory hard” – and therefore difficult to accelerate with custom hardware. As a result, Ethereum mining is still largely done using off-the-shelf graphics cards, allowing regular Ethereum users to participate.

But the economics of the two networks are fundamentally similar. As the values ​​of bitcoin and ether have risen, it has become profitable for people to spend more and more money on mining hardware – and electricity – to generate new coins. While this has made the networks more secure, it has also resulted in both networks consuming astronomical amounts of electricity and thus creating more and more carbon emissions.

The bitcoin and Ethereum communities have reacted very differently to this issue. Satoshi Nakamoto disappeared from public view in 2011. In his absence, the culture of bitcoin has become increasingly conservative. Many bitcoiners are adamant against changing bitcoin’s mining system, fearing that changes could open the door to centralization and eventual government control. As a result, bitcoin is unlikely to move away from proof-of-work in the near future.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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