ETH Merge: from PoW to PoS

The big event planned for September 2022, known as the Ethereum Merge, presents itself as a big development on the cryptocurrency environment and blockchain technology.

The goal of the Ethereum Merge is to change the current Consensus Mechanism of the Ethereum Network from Proof of Work (PoW) to Proof of Stake (PoS).

In PoW, the network transactions are organized and validated by high end computers, that must solve a logical problem in order to validate the network. Bitcoin and Ethereum are the most famous blockchains that are currently running on the PoW consensus mechanism, also known as Layer 1 Blockchains. Therefore, the blockchain relies on high processing power and consequently high energy consumption to exist.

The PoS mechanism presents a solution in which the validation mechanism involves staking the native coin of the blockchain. With that, the trustworthy of the validators comes from locking funds and not computational power. This makes the blockchain eco friendly and opens the possibility of further technological decentralization and horizontal scalability, as with PoS the validator’s clients can be run on low end computers.

Ethereum started functioning with a PoW mechanism, so how could they change their blockchain technology without interrupting the transactions? In order to understand that, one needs to understand the Ethereum architecture. The Ethereum Blockchain is divided into two Layers: Execution Layer and Consensus Layer. The Execution Layer is home to the Ethereum Virtual Machine and comprises of smart contracts and its transactions; and the state of the blockchain, such as balances, transactions, wallets etc. The Consensus Layer works on parallel generating and verifying blocks of transactions, therefore enforcing the blockchain rules. The Merge will consist of taking the current Execution Layer running on Ethereum and change its current Consensus Layer. In order to accomplish that, the new Consensus Layer has been running since 2020 for it to be fully tested before its official launch. This Consensus Layer is known as the Beacon Chain.

A successful Merge may increase the whole crypto ecosystem trust and valuation, as it a big technological development bringing scalability, security and diversity to the Ethereum Blockchain. Also lowering considerably the blockchain’s energy consumption.

The Ethereum merge is scheduled for September, 15th, 2022.