That has had some deflationary effect as it reduces the supply of tokens. Last year, Ethereum passed EIP-1559, a measure which burns, or destroys, some of the ETH paid to process every transaction. Beyond price action as traders bet on the pros and cons of the Merge, the move to proof of stake is expected to have a deflationary effect on ether, or ETH. The other large change in Ethereum is the economics of the network. And so we avoid that by making sure that we have very broad geopolitical dispersion of the nodes.” Money matters “And that forces those rules on to the rest of the world. “If 80% of nodes are in the U.S., and OFAC says, ‘You can't do this,’ that means they have to conform to those rules,” Edgington said. Proof of stake’s transaction model makes the network more distributed compared to proof of work’s miners, who typically consolidate and centralize in fewer places, he said. “And so by having the network so that no one jurisdiction is dominant or can single-handedly take down the network, then everything is much more robust.” “If you've got a lot of operators in a single jurisdiction, then you become vulnerable to regulatory capture,” Edgington said. The goal is to make Ethereum more “censorship”-resistant - meaning less subject to the actions of particular governments. That should open up the network to a much wider range of people to operate it, Edgington said. While there’s a minimum contribution of 32 ether, worth about $50,000 at present, to become a validator, individuals can contribute ether to a pool to join up. Proof of stake, however, doesn’t require hardware, just holdings of ether. Proof of work mining requires hardware and large amounts of power and is therefore a scale game, and the largest miners typically win, pushing small or individual miners out. Instead of miners, the new network will have stakers as validators for transactions. However, the process of running the network and processing transactions is changing dramatically, as are the people involved. And core developers who have a large influence in the development have regular public meetings to discuss potential changes. Decisions about network rules are still determined by all the nodes in the network, through means such as Ethereum Improvement Proposals for voting. That kind of defense is hard to do in proof of work, he said.Ĭontrol of the network won’t change with the Merge. “Under proof of stake, basically, there's no way to succeed - once you revert the chain, it will slash your stake and you lose all of your ether,” Edgington said. In Ethereum’s new proof of stake model, if anyone tries such an attack, the network can automatically detect it and slash their stake of tokens. The move to proof of stake for verifying transactions will make it much harder for anyone to make a 51% attack, which is a way hostile parties try to take over a network and steal tokens by cornering its processing power, according to Ben Edgington, ConsenSys product lead for Teku and a core developer involved in the Merge. One major change will be increased security, which should bring more confidence in Ethereum, developers say. But the Merge, if it goes off smoothly, could do much to bolster Ethereum’s position as the home to a host of cryptocurrencies including its native ether and the largest smart contract network. Major improvements to increase transaction speed and lower costs are arriving later. It’s far from the only change coming to Ethereum, which is facing increasing competition from other blockchains. But proof of stake, advocates believe, will also make the network more resistant to a hostile takeover or government interference. The most visible and popular aspect of the upgrade is reducing Ethereum’s environmental impact, with the Merge cutting energy consumption by about 99%. It’s expected to bring major changes to the security and economics of the network, and ultimately its structure of control. But the Merge, as the switch from proof of work to proof of stake is known, is more than just technical. Ethereum is expecting to make its biggest change ever this month, transforming how transactions are processed and secured on the blockchain.
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