Ethereum Merge, and the energy savings of “Proof-of-Stake”
Originally, both Bitcoin and Ethereum could be mined, as new tokens are rewarded to anyone who verifies a blockchain transaction on their PC. This is called “Proof-of-Work” or PoW. In September 2022, Ethereum (ETH) moved away from PoW to “Proof-of-Stake” (PoS): New coins will be created after crypto owners put in (“stake”) their own coins to get a chance at transaction verification (and, thus, rewards). Solana (SOL) and Cardano (ADA) both already used this method of coin creation before, but Ethereum quickly rose to become the top cryptocurrency in terms of staked value. The main argument for this switch is energy use: The energy consumption of an Ethereum transaction equaled over 100,000 VISA transactions in December 2021 but was much lower after the Merge. The change, Ethereum’s creators observe, can impact both how people perceive cryptocurrencies but also the future development of popular DeFi categories within Ethereum, like crypto lending.Ethereum “Split”, or the search for “Proof-of Work” alternatives
While advocates praise declining energy costs, some of Ethereum's former miners did not agree with the Merge. A graphic that displays how much of the cryptocurrency was held on blockchain addresses known to have mined them reveals a sizable dumping of ETH in September 2022. This because several miners hoped prices would increase after the Merge. When this did not happen, these miners started selling their ETH. The transaction count on the Ethereum blockchain grew to roughly 1.1 million per day in September 2022. Miners, instead, split off and went looking for other cryptocurrencies to mine with their computer hardware. Side project Ethereum PoW (ETHW) had significant price changes during this time, but Ethereum Classic (ETC) and Ravencoin (RVN) were also impacted.
