The Merge is finally upon us. But before diving into the dramatic changes that may or may not come with it however, it’s probably good to know what exactly it is.
The Merge, in this case, refers to a long-gestating effort to change the fundamentals of how the cryptocurrency, Ethereum, is mined, minted, and traded on the blockchain. This years-in-the-making project primarily seeks to address the longstanding critique regarding crypto that the whole enterprise is simply too energy inefficient to justify widespread adoption, especially in the face of our current climate crisis. And things just started emerging.
[Related: The Ethereum ‘merge,’ explained.]
What’s actually changing within Ethereum’s mechanics is somewhat complex (here’s a deeper rundown on that front), but suffice to say, the cryptocurrency is genuinely becoming a lot more eco-friendly. Ethereum is second in popularity only to Bitcoin, and until today ran on something called the “proof-of-work” model. In this system, “mining” computers compete to solve increasingly complex math problems, with the fastest computer awarded the right to add a new block on the blockchain and a small amount of cryptocurrency. The problem with this setup, however, is that every other computer that lost the race trying to solve the same puzzle gets absolutely nothing—all that energy consumption during the sequence was essentially for nothing. Increase that system exponentially with massive crypto mining farms and ever-more-complicated math problems, and… well, you see where this is going.
The Merge, however, transitions Ethereum into a “proof-of-stake” model, which operates by having miners pony up a certain amount of crypto as collateral for maintaining accurate blockchain ledgers. Try to scam the system, and you lose your stake (currently around $51,000). Meanwhile, every computer that “stakes” Ethereum is entered into a kind of algorithmic lottery system, wherein they can then earn more tokens. The more someone stakes, the more likely they are to win the lottery—something that requires a fraction of the computational power as proof-of-work, which Bitcoin still currently runs.
How much less power will this actually take now? We’re talking an estimated 99.992-percent reduction in carbon emissions that stem from computers mining Ether (the name of the currency itself), according to a report from the Crypto Carbon Ratings Institute (CCRI) published earlier today. If the CCRI’s numbers prove correct, Ethereum’s pollution will drop from around 11 million tons of CO2 emissions per year to barely 870 tons, which is slightly less energy than is consumed by 100 homes here in the US within a single year—a pretty dramatic improvement.
What happens next? Well, that’s sort of anyone’s guess at the moment. If successful, The Merge could put pressure on Bitcoin, really the only other major cryptocurrency (sorry, Dogecoin), to finally invest in similar green infrastructure. If the carbon emission reduction numbers are anywhere near the CCRI’s estimates, people who were previously on the fence about Ethereum might finally take the plunge. This could subsequently generate a renewed interest in the alternative financial system, especially after the past year’s staggering crypto crash. The impacts of a potential crypto reemergence remain to be seen, but any reform that drastically reduces a project’s carbon emissions is welcome news these days.