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The Ethereum Merge: What is it and what does it mean for the Mars4 project?

Updated: Sep 12, 2022

Ethereum merge

Ethereum's big transition from proof of work to proof of stake, the so-called Merge, is almost here. As Ethereum co-founder Vitalik Buterin pointed out on Twitter, it should happen around the 15th of September.

In this article, we will look through the Ethereum Merge in more detail to explain what it means for the Ethereum platform and us - after all, Mars4 land NFTs and Mars4 dollars are based on this particular blockchain technology.

For those who are looking for a quick answer to whether the Ethereum Merge will impact crypto assets in any way, you can rest assured that all of your NFTs and cryptocurrencies are safe and no further steps will need to be taken after the Merge is finalized. In fact, the transition has already started and the Merge is just the last step in the process.

The Merge is an ongoing process, not a singular event

Imagine waking up one morning to find out that instead of being 13 years old, you are suddenly 30. While it only happens on the silver screen, this scenario is highly unnerving. Not that being 30 is somehow worse or harder than being 13, it's just that adults lead a different life than teenagers and as we go through life, we prepare ourselves for various obstacles and occurrences that will happen as we mature.

This applies to many things in life: so when the Ethereum team decided to transition from the Proof of Work (PoW) to the Proof of Stake (PoS) mechanism (the difference between these two mechanisms will be explained later), they acknowledged that any fast change would mess up the system. To avoid any possible shutdowns, the developers created a slow but reliable plan to introduce the PoS protocol. This way we won't see Ethereum crash and all of our assets remain safe.

In 2020 Ethereum incorporated the consensus layer called Beacon Chain. It has been running parallel to Mainnet, the layer that is used to authenticate transactions. While Beacon Chain does not process any transactions yet, it operates in parallel and chooses active validators by checking the balances of their accounts. This allows the first stakers to join the network.

The Ethereum Merge is just a final step that allows PoS protocol to take over leaving PoW in the past. The primary outcome is that mining will become obsolete for Ethereum, instead, it will rely on staking from now on. The difference between PoW and PoS will be explained in the next section.

Keep in mind that while our eyes are on the Ethereum Merge, it is not even a final step for the platform as it will not solve all of the scalability issues. The following updates are called the Surge, the Verge, the Purge, and the Splurge.

Let's get technical: Proof of Work vs Proof of Stake

We talked about PoW and PoS quite a lot in the previous passage, but what does it mean exactly?

Miners, Bitcoin and the toll of PoW

The earliest cryptocurrencies, Bitcoin included, use the Proof of Work consensus mechanism as it was the first one to come out. At the time, it was an ingenious mechanism that allowed users to secure and validate blockchain assets.

PoW connects various devices in one network that work together to perform various tasks. Miners are validators of this network - they lend the computing power of their machines to secure the network. Essentially these devices are used to solve mathematical equations enabling the creation of new blocks on the chain. It is needed to keep the system running and to confirm new transactions.

Miners get rewards for validating new transactions. So every time you want to trade Bitcoin, there are a bunch of computers that work like crazy to fulfill your wish - and it doesn't happen for free, you pay hefty gas fees. These fees are high due to the tremendous demand and the amount of electricity required to operate the PoW mechanism.

While this consensus mechanism might have been a great solution in the early stages of blockchain technology, soon crypto enthusiasts realized the significant toll on their wallets and the environment that is associated with PoW. This is when PoS was introduced and started to take over the crypto world.

Environmentally friendlier and more accessible: Proof of Stake

PoS is more environmentally sustainable as it requires far lower amounts of electricity.

According to the Ethereum website, the Ethereum Merge should reduce energy consumption by a whopping ~99.95%!

Another great improvement is that PoS adaptation leads to increased accessibility.

If you want to become a miner, you would typically need to invest a lot of money in equipment. Not only that, but the prices of computer components have been skyrocketing. Miners are hoarding RAM and video cards while putting more pressure on the suppliers, thus increasing hardware prices. This leads to mining farms that take all the profit while most individuals are unable to join the network to start generating passive income.

The beauty of blockchain is to enable anyone to be a part of the network and earn from it, but with mining, it seems impossible.

PoS relies on staking to validate transactions. Participants in the protocol lock their funds for a determined time (for example, 3 months) and start validating transactions earning rewards for successful operations. Staking is energy efficient - on the PoW mechanism miner’s devices are competing against each other to be the first ones to complete the transaction, whereas on PoS validators are picked at random. This is why everyone can start staking to earn passive income. As more people join the network, it becomes less centralized.

Staking is becoming more widespread as it is an easy way to benefit from blockchain technology. After the Ethereum Merge, we will see only two PoW cryptocurrencies left on the top ten list by market cap: Bitcoin and Dogecoin. Nine years ago almost all popular coins were PoW.

Keep in mind that Mars4 dollars can be staked too.

The Ethereum Merge will not lower the gas fees

The widespread notion is that gas prices would drop dramatically following the Ethereum Merge.

While the Ethereum team is working toward this goal, the Merge is not going to change the gas fees. As the Ethereum foundation noted, the gas fees are high due to demand and the Merge is unable to tackle the issue at hand. On the other hand, Ethereum will continue to work on the scalability issues and we can expect to see gas fees dwindle later on.

Until then, other solutions are embraced - for example, Mars4 has created in-game vehicle NFTs using Polygon (also known as MATIC) to enhance the user experience. Since the starting price for these NFTs is barely $89, Mars4 needed to ensure that the cost is not disproportionately increased due to additional fees. We went with Polygon because it is trustworthy and its gas fees and minting costs can go as little as a few cents. Visit the vehicle collection page to find more information.

We are a step closer to fresher air and more power to the people thanks to Ethereum transitioning to PoS. The Mars4 team is more than happy to see this happen as being a part of the crypto community is all about making the world a better place. And while we wait for more upcoming upgrades to the network, the Mars4 team is embracing the changes and celebrating them with all crypto enthusiasts around the globe.

Long live Ethereum!

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