Ever since it announced itself to the industry, Ethereum has been one of the most consistent cryptocurrency networks. The extent of its evolution is felt by the other networks competing for relevance.
In the meantime, the token is set to undergo a massive change in its ecosystem, which is the mechanism it uses for its critical operations.
Like Bitcoin, Ethereum uses the Proof-of-Work (PoW) protocol to verify the blocks on its network platform. In the PoW pattern of operation, miners compete with one another through robust computing systems to solve a cryptographic riddle.
The outcome of the puzzle will allow the winner to validate the already created blocks and land hefty rewards for a job well done. However, the miner with the most sophisticated computer has an advantage over those with lesser capabilities. Therefore, this makes the PoW an energy-demanding activity and has been reported to have a negative environmental impact.
Changing the Consensus Algorithm
In the past couple of days, there has been extensive discussion in the Ethereum community about the need to do away with the consensus algorithm from the PoW to the PoS.
The new algorithm, Proof-of-Stake (PoS), is widely used by significant blockchain networks like Avalanche, Cardano, and Solana.
The PoS protocol does not need energy-intensive operations and hardware. To validate blocks in the PoS, miners must lock up a certain number of tokens in a smart contract. Users stand to lose their coins if users validate an illegal block.
Meanwhile, Ethereum officially began implementing the PoS protocol in December last year. The next step, which is considered the most critical implementation stage, is known as “The Merge.” Once the final stage is completed, mining Ethereum will become outdated and only through the PoS will blocks be validated.
According to billionaire Mark Cuban, the two critical vital points could make the next step bullish. The first is that the environmental impact associated with the Ethereum network will drop drastically. Due to the absence of power-intensive hardware, the carbon footprint will be neutral.
Achieving this will make the argument about the environmental effects of Ethereum and others like NFTs irrelevant and baseless. Since there are no more complaints, the adoption of the technology will soar.
The second key point is, after the completion of the “Merge”, issuance of the ETH will be down by 90%. A historic shift of events for Ethereum. For emphasis, a 90% reduction is the equivalent of three Bitcoin halvings.
Expected Outcome
The move from PoW to PoS will bring immense change to the function and efficiency of the Ethereum network, which will solve some of Ethereum’s most nagging issues.
As the most extensive decentralized mining computing system globally, Ethereum will become eco-friendly and its token deflationary. This will place Ethereum a step above its closest competitor to achieve the proposed move.
The date for the move to the PoS is approaching faster than expected, and the costs of the move have not been communicated yet.
