The Merge Has Completed. It's Crucial If You Run Business on Ethereum
15.09.2022 | 3 min read
Putting the needs of the environment before those of the miners. Ethereum's network has received a huge update that was long overdue, which heralds a New Era for the World's Second-Largest Blockchain. Let's see what's different and how it'll influence those who want to build products on Ethereum.
The long-awaited switch to proof-of-stake has been made on the Ethereum blockchain. It is said that this process, which is better known as "The Merge," will make Ethereum use 99.5% less energy.
Before, the Ethereum blockchain relied on proof-of-work, a way to reach a consensus that requires all the decentralized nodes in the blockchain to do a lot of computing work.
From PoW to PoS: Why Does It Matter
Proof-of-work is a way to turn physical resources into network security. If you want your network to be safer, you need more of these physical resources. On proof-of-stake, financial resources should be used to turn into security.
Proof-of-stake changes the way the Ethereum blockchain works in a big way. It gets rid of the need to mine new blocks because the network is now protected by ETH that has been staked and validators.
Most crypto mining is done today in farms, which might be better-called factories. Because of that system, which Bitcoin was the first to use, the amount of energy Ethereum used was huge. Before the Merge, the network used about 83.89 TWh of electricity each year, which is about the same as what a country like Finland uses. Now, it is 0.01 TWh.
Ethereum: a Powerhouse for Decentralized Apps
On the Ethereum network, there is a well-developed ecosystem of cryptocurrency exchanges, DeFi lending companies, non-fungible token (NFT) marketplaces, and other apps. This is because Ethereum was built on Bitcoin's basic ideas by adding smart contracts, computer programs that use the blockchain as a global supercomputer to store data on its network.
People from the Ethereum community say that "The Merge" will make the network more secure and prepare it for further scaling. 10Clouds, who helped grow many Ethereum-based products, is no exception.
Developers, people who invest in cryptocurrencies, and fans all kept a close eye on the update. People say it was hard because it may have been one of the biggest open-source software projects ever. It took the work of dozens of teams and hundreds of researchers, developers, and volunteers to get it done
The Merge is also a huge deal for DeFi. With the step taken by Ethereum, the decentralized finance industry will be able to become more efficient, giving it more room to grow. It's crucial to keep in mind that as the Ethereum network grows green, there may be a rush of new money to fund new projects or help existing ones grow. Less damage to the environment can be a strong selling point to getting VC funding and raise the value of a company.
It's Only the First Step
Vitalik Buterin, who helped create Ethereum, said about the Merge, "This is the first step on Ethereum's long road to becoming a very mature system, but there are still steps to go."
He had already laid out a plan for the network's next steps, which included "sharding." This is a way to fix the network's slow transaction times and high fees by spreading transactions across "shards," which is like adding lanes to a highway.
Scalability is another important issue for Ethereum. Because of this, the network has been working on Layer 2 solutions. These solutions help an application expand by processing transactions outside of the Ethereum Mainnet (layer 1), but they still have the same security and decentralization as the mainnet.
Layer 2 solutions improve throughput and cut down on gas costs. Immutable X, Polygon, and Polkadot are all well-known examples of Ethereum layer 2 solutions.