Hello their is a lot of talk and buzz around the coming Ethereum merge. One of the key factors other than the 100,000 blockchain data transactions that is going to be possible after the merge is the change from proof-of-work which miner's used to love to Proof-of-stake. If your new to crypto and Ethereum you might be asking what are these and what is the difference? Here's what I've gather these proof's are. Let me Explain.
Proof-of-work
Proof of work comes from mining. It is the consensus between nodes and hosts of the blockchain. Validating blocks on the chain. The more work done the longer the chain. A trial and error process where miners are looking for the nonce of a block. To solve the algorithmic problem. Only block's with valid nounce's are added. One this is achieved it is easy for miner's and client's to verify. This is good for security as if one of these blocks where to change fraud would be detected. Computer's solve these problems and on averages takes a finite time to solve. The drawback of this type of proof is that it is expensive and needs a colossal amount of mining power to complete just one transaction. Requiring specialised hardware and software. Meaning not everyone can take part.
The 51% attack
This proof of work problem is where a cabal of mining pool miners come together and can monopolise the mining power the hash rate for the network essentially overloading the network. You cannot reverse transactions that have already been taken place on the blockchain it is a permanent record remember it is a public LEDGER anyone can view the blockchain and activity all be it, it may take a while to decode and make sense of it all but it is still their for all to view. If they obtain over 51% of the cryptocurrency. Is infrequent in crypto history and hard to do, that doesn't mean it is impossible and would not happen to some of these crypto projects still using proof-of-work
Proof-of-stake
According to Ethereum.org Proof-of-stake is more secure than Proof-of-work and is why they are moving to it, the crossover will take-place and be used after the merge. This is less energy intensive method and use-case. Better scaling solutions for the latest Metaverse and web 3.0 projects. It is more complex then proof-of-work but is a more refined mechanism. It is also a consensus mechanism where miners prove they have capital at risk by expending energy. Their will be a use for validators in smart contracts. Validators check for new blocks in the network occasionally creating new blocks themselves.
The proof-of-stake benefits for the user is low barrier to entry due to reduced hardware requirements, reduced centralisation risk as more nodes secure the network, low energy means less Eth is needed to incentivise people to use it. Which means Eth will become more attractive as an asset class, increasingly every day after the merge. It will be easier to recover a failed network by using a social way to recover the network. A kind of social proof if you like.
So all in all should mean it is easier for the average person to get into this crypto. I anticipate it will also be easier to stake your ETH assets at much lower values for ETH and every ERC-20 token in the Ethereum ecosystem. This is very exciting times, my prediction is more people will be able to get more rewards for the ETH they own after the merge. Staking is a great way to make more on the ETH you own but best to do on-chain and not with risky third party companies like Celsius.
This is not financial advise and I'm not a financial advisor. Is my journal entry. Thanks for reading. Have a great day.
Peace, love and Joy.
