In collaboration with CoinSmart
The ETH Merge chit-chat is poppin’ in the crypto community right now. After all, the first rule of crypto is “don’t stop talking about crypto;” there’s a lot of noise out there. If you’re a crypto-noob, you might be wondering what the heck it is and why you should care.
In a series of upgrades, Ethereum is about to go through the biggest and most critical one yet. Kind of like Y2K for 2022, but without all the doomsday drama. A platform like CoinSmart can help you make sense of it all and even jump in on the action. Here’s what you need to know about the ETH Merge, why it’s happening, and what it means for crypto.
- What is Ethereum and why should you care?
- Smart contracts are the cherry on top
- The world Ethereum built
- What is the ETH Merge in simple terms?
- Why is the ETH Merge a big deal?
- What is PoW and why is it dirty?
- What is PoS and why is it cleaner?
- What will happen after the ETH Merge?
- Is it just about the planet?
- Green, in more ways than one
- Blockchains, blockchains everywhere
- Should you invest in ETH before the merge?
What is Ethereum and why should you care?
Ethereum is the second largest cryptocurrency by market capitalization and the most used blockchain in the world. Why? Well, unlike other cryptocurrencies, Ethereum isn’t just magic internet money.
It’s more like a super-computer with its own all-things-digital ecosystem, making it so much more than “just a digital currency.” By its very design, the Ethereum network is programmable and open to the public, which means anyone in the world can use it to develop innovative and cutting-edge applications.
Think of it more like the world wide web, where people can build websites, apps, programs, and cool new smart gadgets. Yup, like that, but hella better because Ethereum already does what the internet can’t. And the new ETH 2.0 is about to go beast mode (we hope!).
Smart contracts are the cherry on top
The Ethereum blockchain is extra special because it was the first blockchain to use a newish game-changing tech called “smart contracts.” Smart contracts are computer programs that can automatically execute themselves when certain conditions are met.
For example, a smart contract could be used to automatically send money from you to your bestie based on specific coded instructions, like the day after you get paid. Or, it could execute something like a real estate transaction without realtors, lawyers, or escrow.
Smart contracts are especially handy if you don’t really know or trust the person you’re doing business with. I can feel my money-saving-revolution-senses tingling.
The world Ethereum built
Thanks to Ethereum, we now have things like decentralized finance (DeFi), Non-Fungible Tokens (NFTs), and Web3, to name a few. Basically, it works the way the internet was supposed to work. It also means that there is no single point of failure, which makes Ethereum especially resilient against hacks and attacks.
What is the ETH Merge in simple terms?
The ETH Merge is the most ambitious upgrade to the Ethereum network. It marks the switch from the current mainnet to a parallel blockchain that will turn Ethereum into a Kanye song – better, faster, stronger.
That parallel blockchain is called the Beacon Chain, and the Ethereum team has been building it for quite some time. After a series of previous smaller upgrades and tons of tests, they’re just about ready to pull the trigger.
The Merge will bring together the current blockchain with the new one, like two strands of DNA joining to form a double-helix, kind of like when you have a baby. Two people become one, but you don’t really know what your kid will look like, how they’re going to behave, or what they’re capable of until much later.
Why is the ETH Merge a big deal?
Because for a lot of people, crypto is a dirty word. The most important thing about the ETH Merge is the impact it will have on the environment.
Right now, the Ethereum mainnet uses a PoW consensus mechanism to add data to the blockchain. But this method is terrible for mother nature. So much so that it has painted the entire crypto industry as being pretty anti-earth. Bitcoin in particular has been accused of being dirtier than coal. Yikes!
The Beacon Chain uses a different, more environmentally friendly way of doing things. After the merge, the new Ethereum network will be significantly more energy efficient. Some are estimating up to a 99% reduction in power consumption!
How the heck are they going to pull that off? By scrapping something called PoW.
What is PoW and why is it dirty?
PoW is shorthand for Proof of Work, which is a particular method computers use in order to reach an agreement about the accuracy of the information added to the blockchain. Proof of Work (PoW) is the original consensus mechanism used by Bitcoin, Ethereum, and most other cryptocurrencies, for that matter.
Under the PoW system, computers called miners validate transactions and add them to the blockchain by solving complex mathematical puzzles. The first miner to solve each puzzle is rewarded with a certain amount of Ethereum coins, called ETH, for their effort.
While PoW is considered to be very secure, it requires miners to run powerful computers 24/7 to compete for rewards. And millions of them all around the world.
As you can imagine, this process is extremely energy-intensive and has brought crypto, namely Bitcoin, under fire for being a “dirty” technology. As such, ETH and many other cryptocurrencies are moving away from PoW in favour of more sustainable methods like the PoS mechanism.
What is PoS and why is it cleaner?
PoS is shorthand for Proof of Stake; a different type of consensus mechanism computers use to agree on the accuracy of the information added to a blockchain. Unlike the PoW method, PoS does not require mining in the traditional sense.
Instead of using millions of high-powered computers, users that wish to validate transactions and earn rewards simply need to deposit their ETH coins in a designated digital wallet. The process is known as staking, hence the name “Proof of Stake.”
What will happen after the ETH Merge?
Ethereum has the potential to change our lives in many ways. But until the merge, which is scheduled to happen sometime around the 15th of September, 2022, we have no way of knowing if the proverbial world super-computer will come to fruition. And like any other tech upgrade, glitches and bugs can happen.
If the transition is less than smooth, it could trigger crypto chaos and real people could lose real money. If it goes well, it could revolutionize how we live in a post-digital world. Just don’t expect anything earth-shattering to happen right away. Even in the best-case scenario, a great leap forward feels like baby steps while it’s happening.
Next on the roadmap, Ethereum will be divided into smaller pieces, called shards, making it easier to scale, process a higher volume of transactions, and run faster. If the merge is successful, the change could have major implications for the future of Ethereum and the entire crypto/blockchain industry.
Is it just about the planet?
No. The ETH Merge is a big deal because it could be the first step towards a dramatically different way of life. If successful, the change could lay the foundation for Ethereum to eventually become highly scalable and extremely efficient, not just environmentally sustainable.
Like building a skyscraper, you need good bones before you can turn that ambitious blueprint into a reality. Crypto purists believe that could unlock limitless use case potential for blockchain technology going forward. How?
Green, in more ways than one
The merge will hopefully pave the way for developers to build bigger, better, and more relevant stuff. If they can, it could attract more businesses and investors looking to get involved in the crypto/blockchain space. If it goes off without a hitch, it could strike the right balance between the security, efficiency, and sustainability needed for mass adoption.
Also, if more and more companies start using smart contracts built on top of the Ethereum blockchain, for example, then we could see a major shift in how business is done. This could lead to even better efficiency and transparency in all kinds of different industries from traditional finance to healthcare, supply-chain management, government spending, and even voting systems.
Blockchains, blockchains everywhere
Again, if successful, the ETH Merge could break barriers to help make crypto as ubiquitous in our everyday lives as the Big Mac. Or, you know, the debit card in your wallet, your credit file, and even your social insurance number (SIN).
The merge could give Ethereum the torque it needs to revolutionize almost every aspect of our lives. Imagine living in a world where it’s as normal for your boomer parents to trade crypto on the CoinSmart platform as it is on a traditional investment platform. And that’s just the tip of the iceberg. Oh, happy day!
Should you invest in ETH before the merge?
I believe Ethereum will have a major impact on the world economy in the years to come. However, there is still risk involved anytime you invest in anything for any reason, including crypto. Whether or not you should invest in ETH before the merge depends on your risk tolerance and how much you believe in the future of crypto.
Two easy ways to avoid unnecessary risk are to only invest what you’re willing to lose and to use a reputable platform like CoinSmart. It’s one of Canada’s favourite cryptocurrency trading platforms and is federally regulated under the watchful eye of people with legal power.
If you want to jump in on the ETH action before the merge, CoinSmart is easy to use and has all the tools you need to trade crypto quickly, easily, and with peace of mind. It’s designed for every investor from the newbies to the veterans, which means the platform grows with you as you hone those crypto skills.
Is the ETH Merge the start of something big? No one can say for sure. All I know is that I’m ready for change.
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About The Author: Heidi Unrau
Heidi Unrau is the senior Finance Journalist at Hardbacon. She studied Economics at the University of Winnipeg, where she fell in love with all-things-finance. At 25, she got her first bank job as an entry-level teller. She moved up the ranks to Credit Analyst, Loans Officer, and now a Personal Finance Writer. In her spare time, you'll find her hiding in the car listening to Freakonomics podcasts, or binge-watching financial crime documentaries with a pint of Häagen-Dazs. When she's not chasing after her two little boys, she's in the hot tub or arguing with her husband over which cash back card to use for date night. She’s addicted to coffee, crypto, and obsessively checking her credit score on Borrowell.
Fun Fact: Heidi has lived in five different provinces across Canada, loves her free Tangerine bank account, and will never cut back on Starbucks. Like ever.
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