A recent research report by financial services giant Citigroup talks about the implications of Ethereum’s upcoming “merge” protocol upgrade.
Ethereum’s “Merge” hard fork is expected to occur around September 15th, when the Ethereum network will move from Proof of Work to Proof of Stake.
Here’s how the Ethereum Foundation describes The Merge:
“The merge represents the joining of Ethereum’s existing execution layer (the mainnet we are currently using) with its new proof-of-stake consensus layer, the Beacon Chain. Eliminate the need for energy-intensive mining and instead use staked ETH to secure the network. A truly exciting step in realizing Ethereum’s vision of increased scalability, security and sustainability.
“It is important to remember that initially the beacon chain was shipped separately from the mainnet. Ethereum mainnet with all accounts, balances, smart contracts and blockchain state will continue to be protected by Proof of Work even while the beacon chains are running in parallel using Proof of Stake. . As the Merge approaches, these two systems will eventually merge, completely replacing Proof of Work with Proof of Stake.
“Consider an analogy. Imagine Ethereum as a spaceship not ready for interstellar voyages. With Beacon Chain, the community has built a new engine and enhanced hull. After significant testing, it was time to hot swap the old and new engines in flight. This will allow new, more efficient engines to be integrated into existing ships, ready to throw some serious light years into space.“
Last week, Citigroup released a research report examining the impact of the merger, according to a CoinDesk report.
The CoinDesk report continues:
“The merge means the block time will be reduced from 13 seconds to 12 seconds, resulting in slightly lower fees and potentially faster speeds, the memo said. Citi says switching from PoW will reduce overall Ether issuance by 4.2% annually. , and when Ether (ETH) finally deflates, this may improve the case of tokens as stores of value…
“The move to PoS will turn ETH into a “yield asset” with cash flow, which could be interpreted as a form of income for the network, the bank said. Having potential cash flow will allow the use of various valuation methods not available on current blockchains, the bank added. throughput. Given its “enhanced store-of-value properties,” it is likely to be the place where locked gross value increments are protected and traded, the memo said.
“Energy consumption is expected to drop by 99.95%, so post-merged ETH can be considered a relatively energy-efficient and environmentally friendly cryptocurrency, the memo added.“
On August 11, Lex Fridman, a prominent MIT AI researcher, said he chatted with Ethereum creator Vitalik Buterin. Interestingly, Friedman, who isn’t particularly prone to hyperbole or hyperbole, called the merger “a pivotal moment in the history of cryptocurrencies.”
At the annual Ethereum Community Conference (EthCC) in Paris, France on July 21st, Buterin shared his thoughts on the “long-term future of the Ethereum protocol.”
Buterin began by saying:
“The Ethereum protocol is currently in the midst of this long and complex transition, in many ways to become a much stronger and more robust system, right?
“Late last year, I published an updated roadmap document of sorts. There we talked about these big five categories happening in the world of the Ethereum protocol. Merges, surges, barges and some lower ones. Will it be a purge and a splurge?
“Merging is proof of stake. The Surge is sharding, The Verge is his Verkle Trees, The Purge is expiring states and deleting old history, etc. The Splurge is basically all the fun stuff.“
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