🙃 Is ETH Merge Going To Make Us Rich?!

We discuss the switch from PoW (Proof of Work) to PoS (Proof of Stake)

Aug 27, 2022

Okay. Merge is happening. No joke. I know, it has been said thousands of times already. This time it is different, they finally had the guts to give an exact date. How this will play out?! That we don’t know yet. Today we will talk about this PoW thing and how it will change to PoS thing with the ETH Merge that is happening.

👂Feed me with the basics first

As we know, current system of sending money to each other in a traditional system uses banks as a middleman, which serves as an intermediary that verifies whether the sender has enough funds to pay someone else.

No one is happy about it. There is an entire process that takes forever to open a bank account, not to mention that it is not accessible to everyone. FYI, 1.7 billion adults have no access to a bank account.

Well, the whole idea behind crypto is to change that. Especially Ethereum blockchain. The initial concept is to operate without a middleman (no needs for banks as an intermediary). In the current system that Ethereum uses is that transactions are verified by a bunch of computers connected to a network where a software installed helps solving complex puzzles as a way to confirm those transactions. When that puzzle is solved, those participants get rewards in coins in that specific digital currency they are verifying (in our case Ethereum). Okay, enough with technicalities.

This whole process is the PoW (Proof of Work) thing. Transactions are being confirmed by solving those puzzles which requires powerful computers to be able to solve because they are complex. Obviously this process requires a lot of energy consumption. It spends energy as much as Netherlands (~112 TWh/yr).

Ethereum gets a lot of hate for energy consumption and carbon footprints, which required developers to come up with alternatives that will change that. Although you have heard people talk about ETH merge recently, this has been an ongoing discussion for a while now. It goes as back as 2014 when Vitalik did a blog post (don’t bother reading it, you won’t understand a thing) on it. There were a couple of times over years when they promised they will be doing the merge but kept pushing over and over. To a point where it became a meme.

🧟‍♂️ Enough chit-chat. What will change when ETH Merge happens?

That’s a great question. When ETH merge happens, it will go from PoW thing to the PoS thing. Okay, this was not helpful. Let me try harder.

When this merge happens, Ethereum will start using this another framework known as Pos (Proof of Stake). This new framework requires way less energy than the previous framework (PoW). Computers will not be racing with each other to verify transactions (which in turn will require less energy). Instead, a crypto holder will deposit (read: stake) crypto in a shared pool. Every time an exchange happens, one of those holders who participated in that pool will be chosen randomly to verify the transaction and win the rewards afterwards.

🤦‍♀️Will this merge help Ethereum reduce gas fees?

No, it won’t. Although, developers said that this is a crucial and if all goes well, it will serve as a groundwork for future upgrades which will help minimizing gas fees.

💃 Is everyone happy about The Merge?

Of course not. In fact, there are people who are completely against it. Not because they really care about Ethereum blockchain, but because it hurts their souls. Lot of people we know (probably you know a lot of them too), have spent hundreds of thousands of dollars (if not millions) on powerful computers to mine crypto. Ethereum was the most widely used blockchain so that’s where most of the benefits came from mining. With the merge, you will have no longer the option to mine ETH, unless you mine for other cryptos which are way less used, hence less profits.