Ethereum: What Is ‘The Merge’?

If you’ve been following the crypto market talk lately, you will have likely heard the phrase ‘The Merge’. The Merge relates to an upcoming event for crypto’s second-largest asset, Ethereum. So what is The Merge, and what does it mean for Ethereum and the wider crypto space?

What is ‘The Merge’?

The Merge involves transitioning the current Ethereum Proof of Work model to a Proof of Stake model. This will happen by merging the current Ethereum blockchain with the Beacon chain, a Proof of Stake (PoS) chain that was set up to become the spine of the updated Ethereum network, or ‘Ethereum 2.0’ as many refer to it (despite the Ethereum Foundation no longer referring to it as such).

Essentially, The Merge is a big update that will make Ethereum a PoS network.

What is Proof of Stake?

Proof of Work is the original crypto model (used by Bitcoin). It involves miners competing to solve cryptographic puzzles for the right to validate the next block of transactions. That requires a lot of computing power and a lot of electricity to run all that computing power.

For example, by some estimates, Bitcoin mining consumes more energy each year than small countries. In a climate-conscious world, that poses a problem.

→Related article: How to Buy Bitcoin in New Zealand

With Proof of Stake, users stake an amount of a certain coin for the opportunity to be selected as the one to forge the next block in the chain. This removes the need for everyone to exhaust energy competing to win the right like they do with PoW. With PoS, while everyone lines up at the start line, only one person actually runs the race, reducing the amount of energy being used.

What are the outcomes?

Despite making Ethereum greener, there are other benefits that The Merge hopes to achieve. The switch from PoW to PoS removes the need for expensive and complex mining rigs to take part in the earning process (currently dominated by a small handful of massive mining pools). This could potentially encourage more nodes, which helps to strengthen the network.

PoS also incorporates the presence of active deterrents, such as “slashing” events – where a participant will have part of their offering or earnings removed for malicious or negligent conduct in the staking process, ensuring a better standard of community conduct.

PoS is also faster and able to process more transactions per second, which can help reduce the fees involved in ETH transactions.

When is The Merge?

A tentative date for September 15, 2022 has been placed on The Merge.

What next for Ethereum?

If all goes well, The Merge could help Ethereum better address issues such as scalability, sustainability and high fees. If so, it could facilitate increased adoption of Ethereum as a reliable, more secure and more efficient network than many of its competitors.

It’s worth noting that The Merge is not the end of the updates, but rather an important step in what will be a series of ongoing updates.

For example, The Merge will also pave the way for “sharding”. Sharding is a term that generally describes the process of splitting a database horizontally to spread a load, thereby reducing bottlenecks in the system and allowing more transactions per second – something that will be vital as the Ethereum team vies to bring smart contract functionality into the mainstream.

What does this mean for crypto?

The Merge is one of the most highly anticipated and high-profile events in crypto history. So it’s fair to say it will be watched closely. If a success, it could pave the way for other networks to go ahead with merge-like events of their own.

Given Ethereum is second only to Bitcoin, if successful and the desired outcomes achieved, it could be a big step toward crypto becoming a more widely adopted and accepted part of our lives.

Where to buy Crypto in NZ

The display order does not reflect any ranking or rating by Canstar. The table does not include all providers in the market. 

Provider Fiat Currencies Bitcoin Other Currencies Est.
Easy Crypto NZD, AUD Yes 100+ 2018
Independent Reserve NZD, AUD, USA Yes 24 2013
Kiwi Coin NZD Yes No 2014
Swyftx NZD, AUD Yes 228 2017

This information is not an endorsement by Canstar of cryptocurrency or any specific provider. Canstar is providing factual information supplied by providers. Cryptocurrencies are speculative, complex and involve significant risks. Canstar is not providing a recommendation for your individual circumstances or in relation to any particular product or provider.

Learn more about cryptocurrency here

author andrew broadley

About the author of this page

This report was written by Canstar Content Producer, Andrew Broadley. Andrew is an experienced writer with a wide range of industry experience. Starting out, he cut his teeth working as a writer for print and online magazines, and he has worked in both journalism and editorial roles. His content has covered lifestyle and culture, marketing and, more recently, finance for Canstar.

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