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What Is Ethereum 2.0? Understanding The Ethereum Merge

What is Merge?

Originally referred to as Ethereum 2.0, the merge is an upgraded version of the Ethereum blockchain that uses a proof-of-stake consensus mechanism to verify transactions via staking.

The staking mechanism Ethereum replaces the proof-of-work model where cryptocurrency miners use high-powered computers to complete complex mathematical functions known as hashes. The mining process requires an ever-increasing amount of electricity to verify Ethereum transactions before they are recorded on the public blockchain.

Proof-of work-systems devour a tremendous amount of electricity. Bitcoin mining, for example, currently consumes electricity at an annualized rate of 127 terawatt-hours (TWh). That’s now higher than the power consumption of the entire country of Norway.

With proof of work, Ethereum had an annual power consumption roughly equal to Finland, producing a carbon footprint similar to Switzerland. Post-merge, Ethereum is expected to reduce its carbon footprint by up to 99.95%, addressing one of the major criticisms of the cryptocurrency.


    1. Ethereum's Transition to PoS

    The proposed upgrade would see Ethereum move from its current PoW consensus algorithm to a PoS algorithm, which would be more energyefficient and require less computing power.

    2. The Ethereum Merge

    One of the key aspects of Ethereum 2.0 is the proposed merge of the Ethereum network's two existing chains, the main Ethereum chain and the Ethereum testnet. This would allow for a more streamlined and cohesive Ethereum network.

    3. Improved Scalability

    Another key goal of Ethereum 2.0 is to improve the network's scalability so that it can handle more transactions per second. This would be accomplished through the use of sharding, which would allow the network to be divided into smaller pieces that can be processed in parallel.

    4. The Beacon Chain

    The final piece of the Ethereum 2.0 puzzle is the proposed Beacon Chain, which would act as a central coordination point for the entire network. This would help to improve the overall efficiency of the Ethereum network.

    5. Ethereum vs. Bitcoin

    Bitcoin and Ethereum are the two most popular cryptocurrencies, accounting for about 60% of global crypto market capitalization.

    Ethereum’s price has soared 453% in the past five years. That’s even more than Bitcoin, which has gained more than 431% during the same period.

    The merge makes Ethereum a more attractive investment than Bitcoin from an environmental, social and corporate governance (ESG) perspective, but it doesn’t necessarily make Ethereum a threat to dethrone Bitcoin as the world’s top crypto.

    Chris Kline, chief operating officer and co-founder of Bitcoin IRA, says Bitcoin and Ethereum are more complementary than competitive within the crypto market.

    “Bitcoin and Ethereum serve different purposes. Bitcoin is a proof-of-work, limited asset, monetary crypto, while Ethereum’s utility is [as] a Web 3.0 backbone. Both serve as critical and distinct elements of the overall digital asset ecosystem underway,” Kline says.

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