Cryptocurrencies (Bitcoin)

An Analysis of How the Ethereum Merge Will Reduce Cryptocurrencies' Carbon Footprint.

The Ethereum blockchain, the world's second largest, is implementing proof of stake. Perhaps this line doesn't make any sense to you, but the implications are huge.

Whatever your feelings about cryptocurrency may be, the Ethereum Merge is something to take note of. Because of Merge, which has been in the works since 2014 but has been repeatedly delayed, Ethereum, the second largest blockchain after Bitcoin, would be nearly carbon neutral.

As a result, the situation has changed drastically. Bitcoin and ether have come under fire from skeptics who claim the digital currencies are pointless and wasteful of resources. While the first claim is open to debate and various interpretations, the second claim cannot be contested under any circumstances. Bitcoin and Ethereum's carbon footprints are too large to be ignored in a time when halting climate change is increasingly viewed as society's top priority.

Ethereum's Proof of Stake consensus mechanism has been in development since before the blockchain was created in 2014, and will be implemented in the upcoming hard fork. It has been repeatedly postponed because of the complex nature of the technology involved and the enormous financial stakes. The Merge is the latest in a series of upgrades that are reworking the blockchain's fundamentals. This line of updates was formerly known as "ether 2.0." Midway through September is when we'd like to see you by.

Vitalik Buterin, an Ethereum co-creator, said in March at the Eth Shanghai conference, "we have been working on proof of stake for nearly seven years now, but finally, all of that effort is coming together."

Find out everything you need to know about the big day right here.

If using crypto is so bad for the planet, what exactly makes it so?

Knowing the value added by bitcoin miners is essential to understanding the Merge.

Let's say you're thinking about getting into bitcoin mining. A mining rig is a very powerful computer setup used for mining cryptocurrencies by running specialized software designed to crack complex cryptographic puzzles. For the purpose of cryptocurrency mining, this program is employed. Your machine competes with hundreds of thousands, if not millions, of others like it working to find a solution to the same problem around the world. Your computer will be able to "verify" a block, which adds data to the blockchain, if it is the first to solve the encryption puzzle. As compensation, please accept the following: Gas refers to the transaction fees paid by users. For every block they verify, Bitcoin miners receive 6.25 bitcoin (currently worth $129,000), while Ethereum miners receive 2 ether (currently worth $2,400) and gas (which can be huge).

Since a powerful computer is required to compete at this level, many people build up entire warehouses full of rigs for the sole purpose of taking part in this competition. This protocol, known as proof of work, governs how bitcoin and ethereum blockchains function. The hope is that this will allow the blockchain's decentralized nature to persist alongside an increased level of security.

A Delphi Digital analyst by the name of Jon Charbonneau coined the phrase "civil resistance mechanism" to describe this phenomenon. Charbonneau stressed that any blockchain needs to run on a scarce resource that can't be manipulated by bad actors. For blockchains that rely on the proof-of-work consensus mechanism, this resource is electricity, since mining requires a constant supply of it.

Right now, a malicious actor would need to control 51% of the network's power in order to take control of Ethereum. It would take malicious actors controlling 51% of the power in this massive mining pool, as the network is comprised of hundreds of thousands of computers located all over the world. It would cost billions to accomplish this.

This system can be used without worry. Neither the Bitcoin nor the Ethereum blockchains have ever been successfully hacked, despite the widespread fraud and hacking in the cryptocurrency industry. However, the drawback is not obscured. As more miners enter the fray to solve increasingly difficult cryptographic puzzles, the amount of energy needed to do so increases.

How much energy does it take to mine a cryptocurrency?

A great many times over. Bitcoin is estimated to consume around 150 terawatt hours of electricity annually, which is more than the annual electricity use of Argentina, a country with 45 million people. Ethereum consumes about as much energy as Switzerland's 9 million people do in a day, or 62 million terawatt hours.

The vast majority of this electricity is generated by eco-friendly means. The Bitcoin Mining Council estimates that 57% of the power used to mine bitcoin comes from green sources. In this case, the citation is required (Members' honesty is vital to the BMC's operation.) This behavior is not motivated by environmental concerns but by individual self-interest: Mines are often situated close to renewable energy farms because of the low cost of renewable energy sources like wind, solar, and hydro.

Nevertheless, the carbon impact is fairly large. It has been estimated that Ethereum is responsible for greenhouse gas emissions on par with those of Denmark.

Can you explain the advantages of the Merge in detail?

After The Merge is finished, proof of stake will completely replace Ethereum's current proof of work system, which uses a lot of energy.

Staking is a term used in the cryptocurrency industry to describe the process of depositing bitcoin in order to accrue interest. The creators of the stablecoin terraUSD, for instance, assured users that they would receive 19% interest on all staked terraUSD, meaning that a user could deposit $10,000 and take out $11,900 a year later (until it imploded).

If proof of stake is adopted, miners will no longer have to verify new blocks by solving cryptographic puzzles. As a result, a lot of CPU time will become available. They will instead put in ether tokens to a common fund. Think of each of these tokens as a lottery ticket. In the event that your token's number is called, you will be eligible to verify the following block and win the associated rewards.

Despite this, it remains an expensive undertaking. Potential block verifiers, who would be called "validators" instead of "miners," must invest a minimum of 32 ether, or roughly $38,500 USD, to participate. The participants in this system use raw cash contributions to verify blocks rather than supplying electricity. Overriding a proof-of-work system requires 51% of the network's computing power, which is far beyond the capabilities of most malicious actors. To defeat a proof-of-stake network, however, they would need 51% of the total ether staked.

Based on the findings of the Ethereum Foundation's study, the network's energy consumption could be reduced by as much as 99.65 percent if cryptographic puzzles were eliminated.

Why do they call it "the Merge," exactly?

Ethereum's transition from proof-of-work to proof-of-stake will be achieved through the merging of two blockchains. Yes, this is the strategy that will be implemented.

Mainnet refers to the publicly available blockchain. To set it apart from the many "testnet" blockchains used exclusively by programmers, this was named as such. In December of 2020, Ethereum's developers unveiled a brand new network they called the beacon chain. The Beacon Chain is Ethereum's Successor in All But Name.

The beacon chain has been independently functioning as a proof-of-stake chain since its inception one year and eighteen months ago. The process of adding new blocks to the blockchain by validators has begun, but these blocks currently contain no actual data or transactions. In essence, it has been put through its paces in the days leading up to the big event by way of a number of different stress tests.

During the Merge, information currently stored on Ethereum's mainnet will be copied to the beacon chain. Once this transition is complete, the beacon chain will replace Ethereum's main blockchain. In order to ensure that the new blockchain can handle the volume of data and transactions expected during the Merge, Ethereum developers have been running stress tests on it on a number of testnets.

"If you talk to the ethereum devs, and I have, they would tell you that if proof-of-work mining became prohibited overnight, they could perform the Merge right now and it'd be great," Charbonneau claims you can learn by talking to the developers of Ethereum. He claims that developers' focus has shifted away from the implementation of the proof-of-stake protocol itself and toward apps and clients built on top of Ethereum. While the engineers are confident in the protocol as a whole, "if they performed the Merge today, it would be buggy for a few months."

Is there anything that could go wrong?

Absolutely. For Ethereum's detractors, who are more likely to be Bitcoin supporters, the integration is like changing the plane's engine midflight. The plane itself is not the only thing in jeopardy; the 140 billion dollars' worth of ether that is currently in circulation is also in danger.

Technically speaking, the new blockchain may have many unanticipated flaws. Solana, yet another proof-of-stake blockchain, has experienced numerous complete outages this year. Solana stands apart from Ethereum due to its incredibly low transaction fees. This facilitates the use of bots to overwhelm the blockchain, though it is possible that technical limitations will prevent this from happening.

Skeptics question whether proof of stake can replace proof of labor in terms of security. If it turns out that a validator has been malicious, their staked ether will be burned and they will be kicked off the network. Charbonneau speculates that the system could be safer as a result of a mechanism called "slashing."

In addition, Charbonneau stated, "Say someone attacks bitcoin today with 51% of their resources, you can't really do much about it." "They have complete command of the miners and could launch endless attacks against you... Assuming you have proof of stake, it's a breeze to do. If you try to attack the network, we will be able to prove it and immediately disconnect you, meaning you'll lose all of your money."

"There is only one shot in the gun. You will lose the ability to do so forever after that time."

Will the price of ether go up because of this?

The price of Ether has dropped by roughly 70 percent since the beginning of the year, and many investors are hoping that the Merge will revive the cryptocurrency's fortunes. For months prior, this was a hot topic of debate among crypto experts. The right answer is that nobody knows this.

People assume the Merge has already been priced into Ethereum because it has been planned for seven years. Many institutional investors, it is argued, have bet on the success of the Merge by investing in Ethereum. How the Merge affects the cryptocurrency's long-term prospects is far more important than how it affects the price of ether in the short-term.

Charbonneau claims that the environmental motivation for the Ethereum developers to work on the Merge is "certainly a substantial aspect" of the project's rationale. More importantly, as he notes, it's about making the case for Ethereum adoption by corporations less complicated to make.

The reality is, if you take away the environmental caring part, there are a lot of people who are not going to use it [ethereum] and not want to invest in it just based on ESG reasons," Charbonneau said. He was referring to the ESG guidelines that are used in socially responsible investing. Many tech companies have gone on record as saying "we won't move forward until after the Merge."

When will the actual Merge occur?

In all likelihood, the Merge will occur in the month of September. During a recent conference call with Ethereum developers, Tim Beiko, an employee of the Ethereum Foundation, suggested September 19 as a possible release date.

'This merging timetable isn't final, but it's really exciting to see things coming together,' a fellow engineer tweeted. The following is a schedule for your consideration.