The Merge, Ethereum 2.0 for Beginners

3percent Holdings
3 min readSep 18, 2022

‘The Merge’ (also known as ETH 2.0) — the long awaits change of Ethereum has been finally completed on September 15th, 2022. This change is one of the most significant blockchain upgrade in crypto history, changing from Proof-of-Work (PoW) model to Proof-of-Stake (PoS).

What is Ethereum?

Ethereum (also known as ETH) is one of the most well known coins in blockchain world. The purpose of Ethereum is far over than becoming a digital currency. Ethereum offers a decentralized software platform where developers can build and run their applications and smart contracts. Their token, ether (ETH), is its native token that acts as a fuel for programs to run on Ethereum platform. It is currently second to Bitcoin (BTC).

Ethereum is amongst the most reliable and well-established blockchain ecosystem where several decentralized applications (dApps) were developed upon. Various areas of dApps were developed in the Ethereum ecosystem such as decentralized finance (DeFi), non-fungible tokens (NFTs), and gaming applications. ETH has surged 510% in 2021 as the popularity of dApps arise.

There are 2 ways that we can see ether (ETH) as: a digital currency that we can trade like other currencies OR fuels that propel applications to run on Ethereum platform.

What is this change?

Originally, the Ethereum network uses a Proof-of-Work (PoW) model to prevent any fraudulent activities. Miners will have to invest their resources such as electricity and computing power to validate the transactions and receive cryptocurrency as a reward. Increasing amount of power is required to make the network more secured. The capacity to validate with ETH1.0 was around 15 transactions per second. This led to the concern of scalability for Ethereum. Moreover, miners will have to consume lots of energy, which is not sustainable.

Therefore, the goal of the new change in ETH revolves around 3 main points:

  • Make ETH more scalable
  • Make ETH network more secured
  • Make ETH more sustainable (energy-efficient)

To tackle the problem sustainably, Ethereum decides to move away from the existing PoW model to Proof-of-Stake (PoS). This upgrade to ETH 2.0 addresses all the above 3 main points.

Moving from PoW to PoS changes the way transactions are validated. Instead of competing between miners on who can solve the problem first, PoS model will rely on stakers to help secure the network. Stakes will be the collateral for stakers. This means that if a fraudulent transaction has been approved, the validator will get penalized for that. This also removes the need of having miners to solve complex math problem in a timely manner to be the first and get rewarded.

From the scalability perspective, the capacity to validate is now around 1000 transactions per second. From security point of view, the network will be even more secured against all forms of attacks. From a sustainable perspective, this change will reduce carbon footprints, electricity, and energy consumption by around 99.95%.

To ensure the smooth transition to the Proof-of-Stake (PoS) model, the Ethereum foundation has been building the Beacon chain since 2020. ‘The Merge’ refers to merging of Ethereum’s PoS beacon chain to the Ethereum mainnet. The merge has been completed, and now Ethereum is using PoS model.

Why is this important to know?

With this change, multiple crypto investors sees the potential of growth in Ethereum.

For ETH holders, there is nothing to worry about. All transactional history is merged in ‘The Merge’. All tokens are now transferred to PoS network.

— 3percent team

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3percent Holdings

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