NerdWallet: What is the Ethereum merge and why does it matter? Here’s an explainer.

by | Aug 8, 2022 | Stock Market

This article is reprinted by permission from NerdWallet.  The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. The Ethereum network, which powers the cryptocurrency Ether, is making moves to become more sustainable. It’s planning to switch from an energy-intensive proof-of-work consensus mechanism to a more sustainable proof-of-stake system. The Ethereum
merge is the moment at which this switch will take place.

Ethereum’s website states that a final merge date is not set, though a leader on the project tweeted that Sept. 19 was the target date. But the project, which has been in development for a few years, has been delayed several times before. While it seems that plans for the merge have become firmer, more delays are possible. Central to the merge is the goal of reducing energy consumption. Ethereum estimates its energy consumption will drop by more than 99.95%. It also claims the merge will lead to better scalability. Read: 10 rules every new crypto trader should obey so you don’t lose your shirtWhy the merge is happening To explain this transition, the Ethereum Foundation uses an analogy in which it describes Ethereum as a spaceship in mid-flight: “The community has built a new engine and a hardened hull. After significant testing, it’s almost time to hot-swap the new engine for the old mid-flight. This will merge the new, more efficient engine into the existing ship.” So what’s wrong with the old engine? Mainnet, the blockchain used since Ethereum’s inception in 2015, uses proof-of-work to securely add new transactions and other information. A proof-of-work consensus mechanism requires user computers to solve increasingly difficult computations befor …

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