Ethereum to switch to Proof-of-Stake in September 2022

Ethereum to switch to Proof-of-Stake in September 2022

Ethereum has announced that it will soon transition from proof-of-work (POW) to proof-of-stake (POS). The community-run technology powering the cryptocurrency ether (ETH) and thousands of other decentralized applications said that this merge is the most significant upgrade in the history of Ethereum. Extensive testing and bug bounties were undertaken to ensure a safe transition to proof-of-stake.

Like Bitcoin, Ethereum has been on a proof-of-work consensus mechanism since it was launched in 2015. As a reminder, in a Decentralized Finance ecosystem, the transactions are not restricted or controlled by the government. The entire concept of Decentralization is based on the peer-to-peer transfer of money without any intervention from a bank or financial institution. Proof-of-work and proof-of-stake are consensus mechanisms, or algorithms, that allow blockchains to operate securely.

As per the community’s announcement, the Merge represents the joining of the existing execution layer of Ethereum (the Mainnet as used today) with its new proof-of-stake consensus layer, the Beacon Chain. It eliminates the need for energy-intensive mining and instead secures the network using staked ETH. A truly exciting step in realizing the Ethereum vision – more scalability, security, and sustainability.

This transition is indeed a very significant one. In PoW, mining new coins and validating transactions in the process takes enormous amounts of energy. This is the reason why it has been banned by many countries. As the energy is primarily sourced from fossil fuels across the world, the resulting carbon footprint equals those generated by medium-sized countries. PoS is comparatively energy-efficient.

For the users, Ethereum has advised that they need not do anything to protect their funds entering The Merge.

Despite swapping out proof-of-work, the entire history of Ethereum since genesis remains intact and unaltered after the transition to proof-of-stake. Any funds held in your wallet before The Merge will still be accessible after The Merge. No action is required to upgrade on your part.

As we approach The Merge of Ethereum Mainnet, you should be on high alert for scams trying to take advantage of users during this transition. Do not send your ETH anywhere in an attempt to “upgrade to ETH2.” There is no “ETH2” token, and there is nothing more you need to do for your funds to remain safe.

After merging ‘Eth1’ and ‘Eth2’ into a single chain, there will no longer be two distinct Ethereum networks; there will only be Ethereum.

To limit confusion, the community has updated these terms:

  • ‘Eth1’ is now the ‘execution layer’, which handles transactions and execution.
  • ‘Eth2’ is now the ‘consensus layer’, which handles proof-of-stake consensus.

To summarise:

  • Soon, the current Ethereum Mainnet will merge with the Beacon Chain proof-of-stake system.
  • This will mark the end of proof-of-work for Ethereum, and the full transition to proof-of-stake.
  • This sets the stage for future scaling upgrades including sharding.
  • The Merge will reduce Ethereum’s energy consumption by ~99.95%.

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