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Was the HYPE worth it? Ethereum Merge Consequences

26-Sep-2022 By: Anirudh Trivedi
Was the HYPE worth it? Ethereum Merge Consequences

Key Takeaways

  • Ethereum has recently shifted from Proof-of-Work to the Proof-of-Stake consensus mechanism

  • Ethereum will reduce its power consumption by 99% after the merge

  • The merge will not reduce the cost of transactions on Ethereum mainnet

  • This merge might also lead to an unsheltered community of GPU miners and centralization of the Ethereum

On 15th September 2022, the Ethereum blockchain merged with its Beacon chain also known as ETH 2. The beacon chain was working on the Proof-of-Stake consensus mechanism as a testing field for the final shift of Ethereum. This merge of chains has changed the fate of Ethereum by moving it completely from Proof-of-Work to the Proof-of-Stake consensus mechanism.

This event became a scene of amusement for crypto investors from around the world, however, the noise around the merge has created many misconceptions about it. To deal with the increasing fallacies about the subject, CoinGabbar has created this article, listing the major consequences of the Ethereum merge.

This article will not only highlight the before-after picture of the world's second-biggest blockchain and also explain the merge's direct impacts on Ethereum scalability.

Things that Ethereum Merge Will Change

Here are some of the things that the upcoming merge is going to change about the Ethereum mainnet.

Decreased Carbon Emissions

The merge of the Ethereum mainnet with its beacon chain working on the Proof-of-Stake consensus mechanism will reduce global power consumption by 0.2%. Ethereum will reduce its power consumption by 99%, making it possible for it to scale beyond a certain limit.

The reduced cost of mining will make it feasible for the reluctant institutionalized investors to become a part of the Ethereum staking community. This initiation will not only legitimize the cryptocurrency but also facilitate its cross-adoption.

Institutionalization of Ethereum Mining

One of the biggest impacts of the Ethereum merge will not be in the favor of decentralized nature of the chain. As the barrier of electricity consumption ceases to exist, bigger crypto players, owning the majority of the ETH will take the role of transaction validators.

Organizations with higher purchasing power could take the control of the ETH validations only by pulling more ETH from the market. This institutionalization of ETH might promise lasting stability within the ecosystem but it diminishes the decentralization of value transactions on which the Ethereum stands.

Setback to GPU miners

Ethereum mining was processed using graphical processing units within a computer system. These GPUs were neither cheap to buy nor cheap to maintain. But now when Ethereum has shifted completely from the PoW to the PoS consensus mechanism, what will happen to those GPU mining rigs?

Bitcoin mining is CPU centric and does not need graphical processing as in the case of Ethereum. This closes the gates of BTC mining for ETH miners and leaves the GPU rigs to the fate of other GPU-centric mining.

Even though there are viable options present for the ETH miners to cash out their graphical processing capabilities, the profits and reliability of ETH would be unmatchable.

Reduced Gas? – No!

With a shift from the PoW to the PoS consensus mechanism, the cost of validating the transactions will reduce drastically. This might lead you to assume that the mentioned reduction in cost will reduce the transactional cost or Gas for the end users as well. However, the transaction cost on the Ethereum mainnet along with the rate of transactions is more or less likely to remain the same.

The merge might sound unnecessary after this revelation but this is how Ethereum has moved forward. According to some reports, the cost of transactions on the Ethereum mainnet has rather increased by an average of $3 per transaction instead of indicating a reduction.

This will also translate into good news for the Ethereum Layer2 solutions as their need will stay as it was before the merge.

What Lies Ahead?

Becoming the greatest example of a successful blockchain network transition, the Ethereum merge has become ecologically relevant to the present trends. This might not seem like a major change in the context of the user benefits but the merge has surely been successful in keeping the ETH stakeholders on the same page.

Even though the majority of the Ethereum community has welcomed the transition, the voices of disagreement have also echoed loud enough. Multiple challenges require the immediate attention of Ethereum leadership to ensure a stable future for Ethereum and its community. A non-alignment with the needs of its users might turn the course of Ethereum and make it an exclusive chain to operate in. 


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