Ethereum’s Long-Awaited ‘Merge’ Reaches the Finish Line
David Yaffe-Bellany
Sept. 15, 2022Updated 11:14 a.m. ET
https://www.nytimes.com/2022/09/15/technology/ethereum-merge-crypto.html
The moment finally arrived, in the last minutes before midnight on the
West Coast on Wednesday.
After years of delays, discussions and frantic experimentation, the
popular cryptocurrency platform Ethereum completed a long-awaited
software upgrade known as the Merge, shifting to a more environmentally
sustainable framework.
Ethereum is arguably the most crucial platform in the crypto industry, a
layer of software infrastructure that forms the basis of thousands of
applications handling more than $50 billion in customer funds. The
upgrade is expected to reduce Ethereum’s energy consumption and set
the stage for future improvements that will make the platform easier and
cheaper to use.
Celebrations erupted on a YouTube livestream where engineers and
researchers who worked on the Merge had gathered to mark the milestone.
It was a rare moment of joy in a grim year for crypto that saw a
devastating market crash drain nearly $1 trillion from the industry,
forcing some prominent crypto companies into bankruptcy.
“This is going as well as it could so far,” said Danny Ryan, an
Ethereum researcher who has worked on the Merge, as he celebrated with a
group of colleagues.
Crypto users were on the lookout for any glitches that could complicate
the transition. A flaw in the Merge could imperil the broader crypto
industry, upending start-ups and sending the market into a tailspin. The
cryptocurrency exchange Coinbase announced in August that it would pause
certain Ethereum deposits and withdrawals during the Merge as a
precautionary measure.
In interviews before the Merge, Ethereum developers said they had
prepared for snags, though they downplayed the possibility of a
systemwide collapse.
“I don’t want to claim everything will go perfectly without a
hitch,” said Tim Beiko, who works for the Ethereum Foundation, a
nonprofit that helps maintain the platform. “We’re kind of confident
we won’t see network-level issues just because we’ve run through the
thing so many times before.”
The technical details of the Merge are mind-bendingly complex. But,
ultimately, the process boils down to a shift in how cryptocurrency
transactions are verified.
In traditional finance, an exchange of funds involves an intermediary,
like a bank, which verifies that one entity has enough money to make a
payment to another.
Crypto was designed to eliminate such financial gatekeepers. So, early
crypto engineers had to devise an alternative system to ensure that
users had the funds they claimed to have. Their solution was called
“proof of work.” Under that system, powerful computers run software
that races to solve complex problems, verifying transactions in the
process. The system is widely known as “mining” because the
computers earn payments in cryptocurrency as rewards for the
verification service.
By some estimates, Ethereum’s shift to a proof-of-stake system, in
which winners are selected to verify an exchange, will reduce its energy
consumption by more than 99 percent.
Bitcoin, the original and most valuable cryptocurrency, runs on a
proof-of-work system. And, until the Merge, so did Ethereum. But the
process is environmentally draining: To run all those computers requires
an enormous amount of energy.
The Merge shifts Ethereum to a verification system called “proof of
stake” that uses less energy. Unlike proof of work, the new framework
does not involve an energy-guzzling computational race. Instead,
participants deposit (or “stake”) a certain amount of their crypto
savings in a pool, which enters them in a lottery. Every time a crypto
transaction requires approval, a winner is selected to verify the
exchange and receive a reward.
By some estimates, Ethereum’s shift to proof of stake will reduce its
energy consumption by more than 99 percent. And the project’s
developers say the switch will make it easier to design future updates
that minimize so-called gas fees — the costs of executing a
transaction in Ether, the cryptocurrency associated with the Ethereum
platform.
The process of shifting Ethereum to proof of stake required years of
intense study and debate. The platform was founded in 2013 by a teenage
software engineer, Vitalik Buterin, who remains one of the most
influential people in the crypto industry. Ethereum is now run by a
loose network of coders from around the world. For months, they have
gathered on video calls streamed on YouTube to discuss the intricacies
of the Merge.
The shift to proof of stake took so long partly because it required the
construction of an entirely new blockchain — the public ledger where
cryptocurrency transactions are recorded for all to see. That new chain,
the Beacon Chain, was unveiled in December 2020. A series of tests
followed this year.
The Beacon Chain has now finally combined with the original Ethereum
blockchain, signifying the “merge.”
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