Ethereum’s “Merge” is about to put every ether miner out of work

The most significant change in its seven-year history is about to take place in a few weeks. The method called "proof-of-work" consumes more electricity than the whole of Belgium. The switch to a new method called "proof-of-stake" is expected to cut energy consumption by a factor of 1000.

There are high stakes. Chaos is a possibility for the many projects built on top of ether. The culmination of years of planning would be a smooth transition. The date of "the merge" has been pushed back many times to give developers more time to prepare. They were able to make the switch in mid-September after completing a final dress rehearsal.

The world'sEthereum miners will be out of work immediately after a successful Merge. Over the last seven years, thousands of people have bought high-end graphics cards to help maintain and earn ether, a new form of currency. The new system doesn't require the same kind of hardware as the old one, and it doesn't cost as much. As miners leave the industry, the price of used graphics cards could fall.

The switch to proof-of-stake is more than just an energy saving measure. Vitalik Buterin believes the Merge will lay the groundwork for a series of future upgrades that will allow the network to handle a much larger volume of transactions in the future. Critics worry that the new scheme could cause the network to become too centralized, which could lead to government regulation.

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From proof-of-work to proof-of-stake

A block containing a list of transactions is proposed by someone on the network. The block follows the rules of the network. If enough other network participants accept the block, it becomes the official block in the chain.

The biggest challenge for any project is to prevent a malicious party from creating many sock puppet accounts and outvoting the honest participants. This problem could be solved using the principle of "one hash, one vote", which was the main insight of the founder of the digital currency. Whoever has the most computing power has the most influence on which blocks are added to the block chain. Users can be confident in the integrity of the network if honest miners have more power than bad ones. For more information on how this works, check out our explainer.

Vitalik Buterin used a variant of the scheme. By that time, the mining game was dominated by specialized Silicon that was specially designed for computing large numbers of SHA-256 hashes. Buterin developed a new mining method that is difficult to use with custom hardware. The use of off-the-shelf graphics cards allows ordinary users to participate.

But the economics of the two networks are fundamentally similar. As the values of bitcoin and ether have risen, it has become profitable for people to spend more and more money on mining hardware—and electricity—to generate new coins. While this has made the networks more secure, it has also meant that both networks consume astronomical amounts of electricity and hence drive more and more carbon emissions.

The communities have different responses to the issue. The public had a chance to see the man in public view in 2011. His absence has made the culture of the company more conservative. Changes to the mining system could lead to centralization and ultimate government control, which is why many people are against it. As a result, proof-of-work is likely to continue for a long time.