Why “The Merge” Matters for Ethereum and Cryptocurrency

What’s Happening

Big changes could be coming as soon as next month to the Ethereum blockchain, which fuels the world’s second-largest cryptocurrency, Ether (ETH). An event known as “the Merge” is planned, and its backers argue it could result in higher crypto prices going forward.

This upgrade will transition Ethereum to a proof-of-stake model, as opposed to the current proof-of-work model. Proof-of-stake utilizes an algorithm and is said to be more energy-efficient and better for the environment. The “stake” refers to the algorithm’s preference for computers within a network that hold more of a given currency. The “work” model rewards computers that are more powerful and better at solving complicated math problems.

Ultimately, computers or nodes within a network that are chosen are then able to create new coins.

Ethereum’s Energy

Proponents of the Ethereum Merge say by transitioning to the proof-of-stake model, the blockchain network could cut its energy usage by almost 99%. That’s important because the negative environmental impact associated with the mining or creation of cryptocurrencies is a significant concern among some investors.

Meanwhile, Bitcoin (BTC) remains the world leader in crypto, and its network uses the proof-of-work model. Some critics suggest Ethereum is taking a big step forward by shifting to proof-of-stake. It could also lead to more changes and boost the efficiency of transactions.

Impact on Coins

For people who have already invested in crypto, the Merge may not have much of an impact on your current holdings, although some suggest prices could rise over time. That said, for people considering buying crypto, the end result could be a more eco-friendly option.

The Ethereum Foundation wrote a recent blog post warning to watch out for scams, as no action will be required after the Merge. Ether’s price is down significantly since the start of the year, as is Bitcoin’s. Crypto bulls believe the coming upgrade could help boost both coin’s prices, given a successful Merge could boost confidence in crypto overall. Digitally and environmentally conscious investors are sure to pay close attention.

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James Flippin ABOUT James Flippin James Flippin is the son of a financial advisor who grew up hearing and learning about bond yields, interest rates, the stock market, and the ins and outs of Wall Street. After stints as a licensing and business broker for Marcus and Millichap in New York City, James moved into broadcasting and became a reporter and anchor. He covered crime, politics, finance, and tech at NBC News Radio while working part-time as a producer for SiriusXM. James graduated from the University of Delaware with a bachelor’s degree in political science and economics. He's also an accomplished podcaster with over 10-years of experience.

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