Source: https://www.linkedin.com/feed/update/urn%3Ali%3Ashare%3A6960989387190939648
Ethereum Blockchain Merge from PoW to Proof of Stake PoS:
https://lnkd.in/gbFqHXXF
IN-DEPTH:
#Ethereum #Blockchain #Merge https://lnkd.in/gSkydNmr
#BeaconChain https://lnkd.in/gezJKu-D
#Blockchain #ProofOfStake #PoS https://lnkd.in/gab_RBJB
#Blockchain #ProofOfWork #PoW https://lnkd.in/gG_yKgje
1. What is ‘the Merge’?
‘The Merge’ is the name of the event when the Ethereum blockchain changes from using Proof-of-Work (PoW) to Proof-of-Stake (PoS).
It’s called ‘the Merge’ because it is the merging of two independent blockchains that are currently running in parallel. The main Ethereum blockchain is being ‘merged’ with a special-purpose blockchain called the #BeaconChain. The purpose of the Beacon chain is to do one thing and one thing only: be a PoS blockchain. There are no transactions on the beacon chain. There are no #tokens or #DeFi #apps. It is an empty blockchain that is solely meant to be a blockchain that runs a Proof of Stake consensus mechanism. Because the #Beacon #Chain is an ‘empty chain’, it can merge with the Ethereum blockchain and replace Ethereum’s PoW mechanism, without having to be concerned about any other variables. Once these two chains are merged, Ethereum’s #PoW #validation will be replaced by a brand new #PoS #consensusmechanism.
2. Why is the Merge so hyped?
The Merge is considered one of the biggest events in #crypto history since the genesis of #Bitcoin itself. It’s considered this for a number of reasons: No blockchain has undergone such a significant change in crypto’s history. #Blockchains do not change such a critical part of its operation very often, and none have made changes with an as large and robust economy built on top of them as Ethereum has. Ethereum is by far the largest and most robust #economic #ecosystem in crypto, and the security of all of this economic activity will be changed from a PoW-based to a PoS-based economy. There are certainly a lot of #risks involved with getting something wrong, which is one of the main reasons why the Merge has taken so long.
3. How does the Merge impact ETH?
The Merge has a massive effect on the #economics of ETH. To #investors, this aspect of the Merge is the most significant. The Merge drastically changes the #economics of ETH in two ways: Reducing ETH issuance and imbuing ETH as a native yield-bearing #asset. The Merge will reduce yearly ETH issuance from 4.3% to 0.43%. PoW is expensive and requires significant resource overhead to compensate security providers (miners) for their services. In contrast, the costs of PoS #security is merely the opportunity cost of #capital, which doesn’t represent any real-world commodity or tangible cost. Unlike PoW, PoS does not need to issue significant amounts of #currency to pay for security. As a result, these lower costs of security make PoS #consensus #mechanisms far more efficient.
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