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The Merge is complete: Ethereum now runs on Proof of Stake

The moment the crypto industry has waited for years has arrived: Ethereum switched its consensus protocol from Proof of Work to Proof of Stake at 08:44 — and made history.

By Finst News
• 3 min read
The Merge is complete: Ethereum now runs on Proof of Stake

The moment the crypto industry has waited for years has arrived: Ethereum switched its consensus protocol from Proof of Work to Proof of Stake at 08:44 — and made history. Never before has a blockchain been switched to a different consensus mechanism on the fly. The long-awaited milestone is done: a new era is dawning for Ethereum.

Ethereum 2.0: What changes now?

The switch to Proof of Stake is a turning point for Ethereum and brings a suite of changes. The energy-intensive mining is a thing of the past — in the future, the network will be secured by validators and their ETH staked.

This lets the blockchain cut nearly all of its former energy needs, as Uli Gallersdörfer, CEO of the Crypto Carbon Ratings Institute, confirms: "Through The Merge, more than 99.99 percent of CO2 emissions are eliminated. Not just Ethereum itself, but other Ethereum-based systems will become significantly more sustainable as a result.

Ethereum is the largest smart contract platform where most DeFi and NFT trading happens. This major boost in energy efficiency is therefore huge for decarbonizing the entire crypto space. Web3 development, which is essentially built on Ethereum, gets a green makeover — helping broaden blockchain technology adoption.

Proof of Stake tightens Ether supply

Proof of Stake also reduces inflation, i.e., the issuance of new Ether tokens. With Proof of Work, the daily in- circulation was expanded by about 13,000 ETH in mining rewards. The staking rewards, by contrast, are only about 1,600 ETH per day. That means new Ether issuance drops by roughly 90 percent. The reduced supply of new Ether will likely have a positive impact on price dynamics.

Fuel for the Blockchain

Last but not least, The Merge clears the path for new scaling solutions. These solutions boost the network’s throughput. Up until now, throughput hovered around 15 transactions per second, which over the years led to high transaction fees and long wait times.

With the consensus change, scaling solutions will gradually be integrated — the so-called layer 2 solutions. Layer-2 should push performance to several thousand transactions per second. These solutions should also keep gas fees relatively low. Work on this is expected to largely wrap up over the coming year.

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