On June 6, 2022, the price of Ethereum (ETH) was $1,079.95 at 11: 30 am, according to data from Coinmarketcap. Today on July 22, 2022 Ethereum was trading at $ 1,568.09 as of 11 am. This translated to about a 46 per cent return in one-and-a-half months.
Although everyone interested in Ethereum knew that the ‘merge’ of Ethereum with its new upcoming version was going to happen in mid-2022, the exact date was not known, until Ethereum consultant ‘superphiz.eth’ hinted about a possible September 19, 2022 date for the final merge between the two.
But he has merely suggested this date. In no way this specifies that the merge will happen on September 19.
In simple layman terms, this ‘merge’ event is where the consensus mechanism of Ethereum, which is at a ‘proof of work’ stage will migrate to the ‘proof of stake’ stage. Consensus mechanism is a process used by crypto Blockchains to maintain the respective Blockchain’s integrity by taking votes (consensus) from members for decisions. In simple terms, it means that in order to effect change in the specific Blockchain, you need to have some skin in the game.
Punit Agarwal, founder and CEO, KoinX, an automated cryptocurrency taxation platform, said that the proof of stake consensus mechanism will be implemented soon on the Ethereum Blockchain network.
Also, unlike the previous proof of work mechanism, the proof of stake mechanism will need “validators to actually put in collateral in the form of Ether (ETH) into smart contracts. This collateral is used to verify the transactions. In case, if a validator doesn’t perform, or performs dishonestly by adding malicious transactions onto the network, their stakes could be banished.”
Regarding what exactly the various Ethereum validators are responsible for, Agarwal said “they are responsible for checking that new blocks added over the network are valid, and are occasionally creating and propagating new blocks themselves.”
There were some circumstances which the Ethereum foundation realised could damage its reputation and slow down its future growth. With this new update, ‘the merge’, Ethereum hopes to inflict some fundamental change in society, people, and the overall ecosystem, since there are many other Blockchain applications which depend upon Ethereum to provide their service (NFT, Games, others).
Society: Global Warming is a real issue and according to a recent report by The Guardian the temperature recorded (40.2 C) in Heathrow was “absolutely obliterating”. Kiran Tota-Maharaj, Reader in Civil and Environmental Engineering, Aston University, London, said that 40C temperature is not what most infrastructure in Britain was built for, and thus, they could fail if this heatwave sustains.
Ethereum wants to contribute in efforts to stop global warming, and hence, is switching from proof of work to proof of stake.
Tapan Sangal, founder and chief evangelist, P2E Pro Pvt Ltd, a Delhi-based Metaverse company, said the proof of work mechanism needs expensive mining and vast computational power, all of which needs power. Elsewhere, the proof of stake networks “require consensus validators to stake their cryptocurrency as collateral. The adoption of proof of stake will relatively reduce energy consumption (since no mining and computational work is required), which is good for the environment.”
People: Agam Chaudhary, a serial entrepreneur and investor – Web3, Ecommerce space, said that the Ethereum update known as the ‘merge’ will boost its value to people, as it aims to make the Blockchain “efficient, faster and affordable. It will also create more opportunities, especially for investors to stake their ETH and earn rewards.”
Ecosystem: Vitalik Buterin, co-founder, Ethereum (ETH) said they aim to make their Blockchain more scalable and will aim to reduce the block time. Sangal added that with this new update, Ethereum is targeting a “reduction of time and also the gas fees required for each transaction on the Ethereum Blockchain.”
Buterin said they aim to reduce the block time to 12 second from the current 13 second, and this will result in higher scaling of transactions per second (TPS).
According to Coinmarketcap data, the Ethereum gas fee was 10 Gwei for a standard 195 second as of 11 am. For a faster 45 second transaction speed, the fee was 12 Gwei.
Regarding what exactly a faster TPS would mean for users of Ethereum, Agarwal said: “This would enhance the scalability and functionality of Ethereum applications, since the time taken to do a transaction on this Blockchain will be reduced. Also, it would allow various users to build more scalable applications and solutions as per their business demand.”
It is not like all of these changes were to happen overnight.
The Ethereum developer community has been working for seven years now in order to bring about this change without halting the core Blockchain. But the price jump happened within the last week. So, what could be the reason?
Sangal explained that Ethereum developers “did a test-net for merge a few days ago and this indicated that the main-net migration will happen soon. Market participants picked this news up and arrived at the conclusion that the merger could happen really soon. This news (test-net) is one of the biggest reasons for the price surge.
