Crypto has key agreement on September 15
The crypto industry finally has something to help it forget about the difficult first seven months of the year.
In a few weeks, the crypto industry will experience what some call a critical moment: the Ethereum platform, the most ambitious ecosystem – even compared to its main rival, bitcoin – will undergo a major update, which in turn will have a major impact on the entire sector.
This software update, called Merge, will likely take place on September 15, Vitalik Buterin, one of the co-founders of ethereum, tweeted on August 12.
Ethereum voltage
“The merger will happen around September 15,” says Buterin, but he warned that the date could still move due to technical incidents.
The excitement surrounding the merger has contributed to the strong upswing in ether, the original token of the ether ecosystem.
Ether has risen nearly 18% in the past seven days to $1,897.29 at last check, according to data firm CoinGecko. By comparison, bitcoin is up 5.5% at $23,932.21.
The date comes after developers conducted their last test, on August 10. This test, known in the industry as the Goerli merge test, passed without major incident, just a few minor issues. Many developers followed the test live via live broadcasts on YouTube.
These live parties are proof of the importance of this update, which has been in the pipeline for years. It has been postponed several times, but the developers seem convinced that the time has come.
Less energy consumption, cheaper transactions
The merger is expected to reduce ethereum’s energy consumption, lower transaction fees (also known as gas fees), and make operations easier and more fluid.
Thousands of projects and millions of investors depend on the merger because ethereum is the house, for example, of more than 3,000 decentralized apps, from games to commerce, including loans.
On ethereum, we have seen various trends emerge, such as initial coin offerings, decentralized finance (DeFi), non-fungible tokens (NFT) and, more recently, the metaverse.
Ethereum has also enabled the emergence of smart contracts, meaning there is no human intervention in a transaction between parties. Everything is controlled by mathematical codes.
But network performance has not been able to keep up with increasing demand. For several months, ethereum has therefore seen significant congestion, which, among other things, has led to a sharp increase in fees on the network.
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The developers have worked on several measures to improve the network’s performance so that it can process more transactions without degrading the user experience.
These changes have long been grouped under the name ethereum 2.0.
The main changes are the transition from proof-of-work to proof-of-stake, and the deployment of sharding, a solution that aims to divide the network into several subnets, in order to increase processing capacity.
Parting with Bitcoin
Proof-of-work is a mechanism for validating transactions. It asks participants to perform complex calculations in return for the chance to validate a set of transactions and add them to the blockchain. For that effort, these participants will earn a certain amount of cryptocurrency.
The job is to guess, as accurately as possible, a unique alphanumeric string of 64 characters. This work used to be done by amateurs, but the processing power required to perform the effort increases over time. So this so-called mining process is now reserved for specialized companies and organizations – that is, those who can afford to buy the necessary hardware and the power to run it.
Proof-of-work consensus mechanisms such as bitcoin have come under heavy criticism because the related hardware consumes enormous amounts of power.
Proof-of-stake asks participants to put up their own money for the chance to validate transactions and add a block to a blockchain, instead of performing complex calculations.
The more cryptocurrencies a person stakes, the more likely they are to be chosen to complete a block of transactions on a blockchain and earn a certain number of coins.
Not requiring powerful hardware, proof-of-stake is considered a greener consensus mechanism than proof-of-work.
Ethereum “will use at least ~99.95% less energy after merging,” the Ethereum Foundation said.
The Merge aims to connect the application part of ethereum as we know it, namely the entire application ecosystem (Ethereum 1.0), to the new proof-of-stake consensus mechanism (Ethereum 2.0).
As a reminder, this consensus layer was deployed in December 2020, via the launch of the beacon chain.
Ethereum will be Ethereum 1.0 (execution layer) plus Ethereum 2.0 (consensus layer) combined.
