Introduction
Ethereum (ETH) has been a long-standing crypto giant that was the first project to implement the use of smart contracts in the crypto space. With a market cap of $229 billion (at the time of this writing), it is no surprise that this topic has been trending for days on end, leaving footprints in the digital space.
In simple terms, the long-awaited merge involves the integration of ETH’s current blockchain and the Beacon Chain that was launched back in 2020, where its main purpose is to replace the proof-of-work (PoW) consensus mechanism with proof-of-stake (POS). The Beacon Chain will utilize the PoS mechanism that runs in parallel with the current ETH mainnet to expand the functionalities of the current ecosystem.
Why is the ETH Merge necessary?
Although the ETH merge does not solve all of its long-standing issues such as its high gas fees, the transition from the PoW to PoS consensus mechanism will greatly reduce energy consumption by up to 99.5%. Why is this important?
To provide some context, we should first understand how the PoW mechanism works. In order for mining to take place, crypto miners have to set up powerful rigs to solve highly complex cryptography puzzles. If you manage to complete the puzzle first, you will then be given the right to validate the block and reap rewards. Here’s where the problem comes. Who is stopping people from loading up warehouses filled with rigs to increase their chances in this perfectly competitive race? True enough, the annual energy consumption for ETH currently stands at 106,33 TWh which is way higher than the annual consumption of countries like Singapore. This therefore led to an environmentally unfriendly operation that received backlash from the masses.
How will the merge affect investors?
The new merge is set to be x2000 more energy efficient as compared to its previous operations, however, that is not all. Investors are seeing a rally as the price of ETH has increased around 100% since 2 weeks ago upon successful completion of its testnet merge.
Investors can not only anticipate a faster and better ETH with a higher level of scalability, but the new PoS mechanism will also open up increased staking opportunities. Additionally, with a decreasing circulating supply of ETH, we can definitely be hopeful about its long-term value.
Conclusion
Whether you are invested in ETH or not, this merge is crucial to the entire crypto industry. Like many other crypto enthusiasts, I too am excited to see how this will pan out.
Will CoinWind accept ETH staking in the future? There is no confirmation on this but make sure to watch out for space to stay updated with our latest updates! Let us know what you want to see next in the comments below. Till next time CoinWinders!
Related Reading:
How Can You Earn on CoinWind?
https://medium.com/coinwind/how-can-you-earn-on-coinwind-d2252d224d8b
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