Understanding Ethereum After The Merge

Earlier this year, we celebrated Ethereum’s seventh anniversary. It was an opportunity to look back at some of the platform’s big milestones and the key players who have helped drive its advancement. And what a long way we’ve come! Since its launch in 2015, Ethereum has matured significantly, enjoyed substantial user growth and is well on its way to becoming a more mainstream business tool. However, despite the myriad benefits it offers, the platform has also long endured significant criticism related to its environmental footprint. And, this critique has been valid…until now. On Sept 15, a significant and highly anticipated Ethereum update, known as The Merge, revolutionized some of the fundamental characteristics of the platform, changing the way in which the blockchain grows and making its historical environmental challenges just that: history. To better understand the platform’s previous sustainability issues, and this important solution, let’s rewind to Ethereum’s beginnings.

In 2015, Ethereum was launched as a Proof of Work (PoW) platform. With PoW, Ethereum node operators, known as “miners,” compete to propose new blocks in the chain. This competition demands significant computational work and requires large amounts of energy to execute. It’s important to note that Ethereum’s founders developed the platform this way intentionally. The PoW format, pioneered by Bitcoin, was effective at keeping the system secure – since mining new blocks requires significant computational work, and miners have to pay for the energy (and buy lots of hardware), no single miner can dominate the network. This approach helps keep block production decentralized, which ensures the security of the network and prevents malicious actions – all important and positive features of the Ethereum blockchain.

The downside, of course, is that the energy exerted to add to the blockchain in a PoW system creates a significant carbon footprint. This challenge didn’t come as a surprise. Ethereum’s founders knew that PoW would eventually become unsustainable, and switching to a Proof of Stake (PoS) system was always a planned step on the Ethereum roadmap. With PoS, contributors, known as “validators,” make new block proposals by locking up 32 ETH of their own money, instead of competing. Before a block is added to the chain it must be approved by two-thirds of validators, and if it’s rejected a portion of the validator’s 32 ETH investment is lost. This costly punishment helps prevent malicious actions and ensure the overall security of the ecosystem.

The move to PoS is what has been dubbed The Merge. It’s been talked about for some time now and is expected to drastically slash the platform’s energy consumption and significantly reduce its carbon footprint. The Ethereum Foundation suggests The Merge will cut Ethereum’s energy use by an incredible 99.95%, allowing it to completely shed the environmental stigma it has long carried and positioning it to be an even more attractive and viable business tool.

Perhaps you’re wondering, why has it taken so long to get to this point? The simple answer is, it’s complicated. Building a scalable and decentralized PoS system required extensive research and significant innovations in cryptography. The PoS technology available at the time of Ethereum’s launch in 2015 didn’t meet the community’s standards for decentralization and security, and while other projects opted to move to PoS earlier and make compromises in these areas, Ethereum refused to make those sacrifices. Instead, developers took the time needed to ensure the long-term health, functionality and growth of the platform, all critical factors for business users.

The business benefits of the move to PoS are clear: a more sustainable platform makes for a more attractive business tool and mitigates the risk of incurring environmental shame for building on a PoW blockchain. In fact, the move to a more sustainable model is likely to boost Ethereum’s appeal across a broad audience, attracting more users and ultimately helping to build a stronger, more secure ecosystem.

While The Merge should not be viewed as Ethereum’s “final destination,” it is a significant step on the platform’s roadmap that will alleviate the environmental criticism it has long endured and vastly reduce its carbon footprint. Having recently looked back on the progress of the first seven years of Ethereum, it’s exciting to look forward to what the next seven years may bring. We are now living in a post-Merge world, and Ethereum is an even stronger, more sustainable platform that can better help businesses across industries drive efficiencies, cut costs and achieve their goals. Here at the EEA, we can’t wait to help more companies utilize this valuable tool to drive their operations forward.

Want to learn more about the EEA and the many benefits of membership? Reach out to team member James Harsh at james.harsh@entethalliance.org or visit https://entethalliance.org/become-a-member/.

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