The market of cryptocurrency is constantly changing. The volatile nature of digital money creates mistrust in the minds of investors. Small ups and downs in the graph of any crypto lead to high panic selling. This declines the value of cryptocurrencies. Several types of cryptos in the market have lost their value significantly in recent years.
In this high panic situation, Ethereum took an extraordinarily risky step that can hugely impact the crypto market. Ethereum completely changed its blockchain system. It was called ” The Merge”. This step will probably change Ethereum forever. Investors around the world could not digest it, and it led to clashes of opinions. Here is the truth behind the unacceptance of the investors.
What is The Merge?
Ethereum, the second largest cryptocurrency, followed the same way as others to mine their coins. It was called the proof of work model. This model involves nodes that are different computers being a component of a large computer network. These nodes have to compete with other nodes to solve complex mathematical problems. The nodes that solved this were able to generate the next block of coins.
This digital currency suddenly changed its blockchain model on the 15th of September. The merge happened between two work models, the proof of work and the proof of stake. Due to this merger, Ethereum tackled the energy required for mining the coins. Along with it, the network became more secure with the help of staked ETH. This has made Ethereum more secure, scalable, and sustainable.
Initially, all the information on the blockchain was handled by proof of work, and proof of stake was functioning simultaneously. Then these two systems completely merged, and the proof of stake took over the proof of work permanently.
Advantages of PoS Systems?
The greatest advantage of using a PoS system is the idea of stakes coming into action. The investors can keep their tokens in the system for a specific period. This works like saving in the bank account. Having more tokens gives you a better influence over the system.
PoS algorithms can work best when most participants hold tokens in the network. The token holders have to predict the outcome of a transaction. If the prediction is accurate, you can earn rewards. This process makes the system more self-sustaining. In case of any kind of illegal actions, other nodes can simply eliminate them from the network.
Transaction Time is less.
PoS systems are coming out as a faster and more efficient system for transactions. PoW blockchain has a lot of gaps between blocks. The PoS system beats the PoW system here. The PoW system does not have fixed timing between conductive blocks. PoS time is as little as one second. It decreases the latency of the transaction. Different applications like decentralized exchange and communication apps benefit from this system due to its low latency rate.
Hardware Mining Infrastructure is Not Required
This is one of the biggest regions due to which PoS took over the Pow system. PoW systems need heavy ASIC machines that are highly expensive. These expenses add up to the network and make transactions more costly. PoS systems do not need any hardware. It only works on an algorithm that is similar to the lottery system. This system of PoS is designed in such a way that it keeps the transaction cost at the lowest.
Mining waste has less chance of leakage.
PoS is an extremely simple and convenient model that works only with statistics, and its algorithm rewards people for their work in the network. On the other hand, PoW requires a huge amount of energy and also creates a lot of heat. It is observed by Digiconomist that the amount of energy required to mine bitcoin can power more than 2 million houses. The PoS system is not dependent upon any resource-intensive process. This makes PoS more centralized than PoW was ever before.
Why Are Investors Unhappy About The Merge?
Investors all around the world are highly skeptical about this decision to take up Ethereum. Some have opinions that Ethereum will grow, but maximum think that the price drop will persist and Ethereum will collapse.
As Ethereum has taken the model of Proof of Stakes, the control of the network will be on the stakeholders. The individual with more stakes will have more impact on the system. Due to this simpler process, Ethereum can gain a lot of investors. As the flow of value will be in the hands of the investors, it will attract greater participation of investors in the blockchain. With the increase of investors, the rate and value of Ethereum will grow rapidly.
The probability of this happening is extremely low. Economists have predicted that due to the PoS process, the value of Ethereum will be in the hands of limited people. These people can manipulate the rates according to their own convenience. This is because to become a minor, the investors first have to lock up their ETH. This will qualify them as validators. But the minimum requirement to be an individual stakeholder is 32 ETH. Currently, it is valued at around USD 52,000, while Ethereum is at its lowest. This shows only large investors can mine new blockchains, which gives them total control. People constantly fear that the Ethereum digital currency will crash due to its situation.
This new form of Ethereum came with “The Merge.” This is where the system became a PoS model, with improved working that is environmentally friendly. This led to unhappy investors as there was skepticism among them about the outcome of this new system. They believe only investors can manipulate the power over Ethereum. As of now, the mining process is favorable for the rich. This will spread mistrust and panic among the small investors of Ethereum. They may take their money out of this crypto, eventually leading to its collapse.