“The Merge” is an update to Ethereum that replaces the existing proof-of-work consensus method with a more eco-friendly, efficient, and secure proof-of-stake consensus mechanism. All blocks on Ethereum will be generated using the new Proof-of-Stake (PoS) consensus method after the two networks combine.
Since there are thousands of nodes in Ethereum’s network, proof-of-work (PoW) is being used to guarantee consensus. In spite of its reliability and security, PoW consumes a lot of energy. Each block on the network is generated by solving a difficult mathematical problem using powerful and energy-hungry GPUs.
Proof of Stake’s Big Chances to the Network
Proof-of-stake (PoS) ensures the network’s security in a different manner. Anyone with 32 ETH may become a validator, a node in the network’s consensus process, using the proof-of-stake (PoS) method. To complete a block, at least two-thirds of the validators must agree.
This means that any bad actor who attempts to use an excessive number of validators to go back in time and undo a completed block (the equivalent in PoW of a “51 percent assault”) would have their money reduced by a certain percentage, meaning they will lose some of their staked Ethereum. Attacks become prohibitively costly because of this; similar to a PoW system, if you use your mining equipment to attack the network, your mining equipment will catch fire and be ruined.
In contrast to PoW, PoS does not require the same amount of resource-intensive gear. It should be possible to execute the software needed for 32 ETH staking on any current consumer-grade device. A single machine may still operate several “validator slots” if you bet more than 32 ETH, but the hardware requirements increase as you stake more. The move to PoS is anticipated to save approximately 99 percent in energy costs, according to most estimations.
Impacts on the Average Ethereum User
A new consensus mechanism known as proof-of-stake enables validators to propose and verify blocks without expending any more energy on mining them. In order to win blocks, proof-of-work miners must “compete,” which motivates them to buy and use more energy-efficient equipment. Because block proposal chances are distributed at random via proof-of-stake consensus, part of the fierce rivalry that exists in proof-of-work is reduced.
Mining pools and big miners may dominate the network because of the high cost of mining equipment and the limited availability of electricity. Proof-of-stake, on the other hand, enables individuals with lower initial commitments to become network validators. Validators grow more varied and broad, which reduces Ethereum’s reliance on a few large validators and increases its overall security.
Ethereum’s economics will be different under proof-of-stake because of this. It is anticipated that the emission rate will decrease below the 2 ether block reward presently given under proof-of-work, with respect to the ether rewards distributed throughout the network.