Proof of Stake ETH — What Does it Mean?

If you have been around the cryptocurrency market the last few years (or more specifically the last few months), you’ve heard about the Ethereum (ETH) Merge. It’s been a topic many have debated and it’s finally scheduled to happen soon. Some say it’s good for ETH, whereas others want to fork ETH and create a Proof of Work (PoW) ETH chain.

We aren’t going to tell you what to think about the merge, instead we will give you the facts and let you decide if it’s good or bad for ETH.

Currently ETH is a Proof of Work Blockchain (Miners solve algorithms to verify blocks). This process takes energy, as computers have to solve problems. Today, the two biggest blockchains (Ethereum and Bitcoin) are both PoW.

What are the problems with PoW Blockchains:

1) PoW blockchains require specialized hardware — this hurts decentralization because of the expense.

2) Lots of Energy is used in the process (consumes around 100 terra watts per year)

3) High Fees — PoW block size and efficiency can only handle about 30 transactions per second.

What is “The Merge”:

The Merge is the process of ETH going from a Proof of Work blockchain to Proof of Stake(PoS).

This is a much more difficult process than creating an entirely new blockchain that is Proof of Stake. This is because while you are developing the PoS, the platform has Billions of dollars in transactions it needs to protect. The ETH blockchain platform can’t afford a hack on the PoW blockchain while undergoing the conversion to PoS. The length of the process has worried a lot of people about the success of the merge as it’s been talked about for about 5 years.

What is Proof of Stake:

Proof of Stake is a type of blockchain that users “stake” their funds to verify the blocks. In return for staking your assets, you are paid out a fraction of the gas fees.

If stakers act maliciously they can lose some or all of their staked ETH. This secures the network and makes it difficult for bad actors to take control of the network and verify false transactions.

For each block, validators are a randomly selected group equal to 1/32 of the network. And of those validators, one is chosen to be the block proposer. On the ETH PoS blockchain all stakers will earn the same reward whether they are a proposer, validator, or nothing on that block.

What’s currently happening with the ETH Merge:

Right now, people are anxiously awaiting the ETH Merge. Currently about 13 Million ETH are staked into ETH2. ETH2 is the PoS ETH, and stakers will unlock their tokens about 6–12 months following the merge.

ETH has passed all the testnets and now just The Merge with the mainnet is approaching. Once ETH merges with the mainnet it will officially become a Proof of Stake Blockchain. The date believed to be the Merge is September 15/16. Less than a month away!

What does this mean for users?

1) Energy Efficiency: Projected ETH could have a 90+% reduction in power used.

2) Less Reliance on Specialized Hardware: No specialized computers needed to be a validator in POS.

3) Reduced Centralization: With reduced cost more people can participate and become validators.

4) Less Issuance of ETH: With less cost to validators, stakers don’t need to be incentivised as much to validate blocks.

5) Robust Against Attacks: Penalties for bad validators are worse than a PoW Blockchain.

6) Scalability: Currently ETH is about 30 Transactions Per Second. POS is up to 100,000 Transactions Per Second.

To Join The LifeDeFied Discord Server: https://discord.gg/MvtqWsgZ

To stay up to date on The Merge updates and info: https://ethereum.org/en/upgrades/merge/

To Preorder Vitalik Buterin book on PoS (Coming out September 27): https://www.amazon.com/Proof-Stake-Ethereum-Philosophy-Blockchains/dp/164421248X/ref=sr_1_1?crid=1DVBQ2J2OC4KX&keywords=vitalik+buterin+proof+of+stake&qid=1661151064&sprefix=vitalik+%2Caps%2C79&sr=8-1

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