Ethereum replaces proof-of-work with proof-of-stake, making miners unnecessary.
The Ethereum blockchain has existed since July 2015, and planning for today’s change has been in the works for several years. Because a botched transition could have caused chaos, Ethereum developers over the past year have “repeatedly pushed back the date of ‘the Merge’ to give themselves more time to prepare,” as Ars writer Timothy B. Lee previously wrote in a detailed feature on the transition. The Merge will “put the world’s Ethereum miners out of work,” as the new system doesn’t require the powerful graphics cards previously needed to maintain the blockchain and create new ether, Lee wrote.
The switch was highly anticipated. “When the Merge officially kicked in at 6:43 a.m. UTC, more than 41,000 people were tuned in on YouTube to an ‘Ethereum Mainnet Merge Viewing Party,'” CoinDesk wrote. “They watched with bated breath as key metrics trickled in suggesting that Ethereum’s core systems had remained intact. After about 15 long minutes, the Merge officially finalized, meaning it could be declared a success.”
Before the Merge, Ethereum’s annualized power consumption was comparable to the country of Chile’s, and its carbon footprint was similar to Hong Kong’s, according to Digiconomist’s Ethereum Energy Consumption Index.
The ether price was down almost 9 percent today as of this writing, while bitcoin had dropped about 2.4 percent.
No more mining
The official Ethereum website explains that the Merge “was the joining of the original execution layer of Ethereum (the Mainnet that has existed since genesis) with its new proof-of-stake consensus layer, the Beacon Chain. It eliminated the need for energy-intensive mining and instead enabled the network to be secured using staked ETH.”
The Beacon Chain was created in December 2020 “as a separate blockchain to Mainnet, running in parallel.” After a lot of testing, it was ready to take over.
“The Beacon Chain was not originally processing Mainnet transactions. Instead, it was reaching consensus on its own state by agreeing on active validators and their account balances,” the Ethereum.org merge page says. “After extensive testing, it became time for the Beacon Chain to reach consensus on real world data. After The Merge, the Beacon Chain became the consensus engine for all network data, including execution layer transactions and account balances.”
Now that the change is complete, “mining is no longer the means of producing valid blocks. Instead, the proof-of-stake validators have adopted this role and are now responsible for processing the validity of all transactions and proposing blocks.” The joining of Mainnet with the Beacon Chain “also merged the entire transactional history of Ethereum,” so no history was lost in the process.
The change should be seamless for people who hold ether. Funds will still be accessible without any user action. “There is no such thing as ‘old ETH’/’new ETH’ or ‘ETH1’/’ETH2’ and wallets work exactly the same after The Merge as they did before—people telling you otherwise are likely scammers,” the Ethereum project said.
Less ether will be issued
Another Ethereum.org page explains how the issuance of ether will change post-Merge and why less ether needs to be issued:
Validators on the Beacon Chain are rewarded with ETH for attesting to the state of the chain and proposing blocks. Rewards (or penalties) are calculated and distributed at each epoch (every 6.4 minutes) based on validator performance. The validator rewards are significantly less than the miner rewards issued on proof-of-work (2 ETH every ~13.5 seconds), as operating a validating node is not an economically intense activity and thus does not require or warrant as high a reward.
By contrast, “mining is an economically intensive activity, requiring high levels of ETH issuance to sustain,” the page says. Before the Merge, mining rewards totaled about 13,000 ETH per day, and rewards for staking were 1,600 ETH per day.
“After The Merge, only the ~1,600 ETH per day will remain, dropping total new ETH issuance by ~90 percent,” the page says. To participate, “validators explicitly stake capital in the form of ETH into a smart contract on Ethereum,” according to the proof-of-stake explanation. “This staked ETH then acts as collateral that can be destroyed if the validator behaves dishonestly or lazily.”
A validator must deposit 32 ETH into the deposit contract and run software including an execution client, a consensus client, and a validator.
“Whereas under proof-of-work, the timing of blocks is determined by the mining difficulty, in proof-of-stake, the tempo is fixed,” the proof-of-stake page says. “Time in proof-of-stake Ethereum is divided into slots (12 seconds) and epochs (32 slots). One validator is randomly selected to be a block proposer in every slot. This validator is responsible for creating a new block and sending it out to other nodes on the network. Also in every slot, a committee of validators is randomly chosen, whose votes are used to determine the validity of the block being proposed.”