The Merge: From Proof of Work to Proof of Stake

Proof of Stake vs Proof of Work

In PoS, validators are distributed around 1,600 ETH per day as rewards for voting correctly. Prior to the Merge, the Beacon chain was running in parallel to the PoW chain meaning that their combined Proof of Stake vs Proof of Work issuance was close to 14,600 ETH/day pre-merge. After The Merge, only the ~1,600 ETH earned from staking rewards will be introduced to the network per day, and no new ETH will be awarded to miners.

Proof of Stake vs Proof of Work

Anything that runs on the web, with all users accessing the SAME LEDGER, is centralized. The market never cared about the ideology of decentralisation — they’re in it for the money. If anyone cared about decentralisation, nobody would use Binance Smart Chain. NFTs won’t have their current ghastly energy footprint, so that’s nice.

What is most profitable to mine post the Ethereum merge?

The way it achieves this is completely different, leading many commentators to believe that it barely works at all. For many prominent cryptocurrencies like Ethereum, Cardano and EOS, the solution is the Proof of Stake consensus protocol, first authored by Sunny King and Scott Nadal in 2012. The process of solving the puzzle is called “mining,” and it requires miners to perform a large number of calculations using specialized hardware. Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. ‘Cos I didn’t realise at the time I wrote this – but the ETH you make as a validator?

  • NFTs won’t have their current ghastly energy footprint, so that’s nice.
  • The block created by the proposer is then broadcast in their slot to be considered for addition to the canonical Beacon chain.
  • In a PoW system, validators (also known as “miners”) compete to solve a complex mathematical puzzle in order to validate a block of transactions.
  • The protocol avoids this by introducing a state called inactivity leak.

Unlike fiat currency such as the US Dollar or British Pound which is printed, cryptocurrencies follow one of two models when it comes to the creation and validation of cryptocurrency onto the blockchain. In new and low-valued cryptocurrencies, an individual or group on PoS-based blockchain platforms can gain an advantage over others. This advantage may increase their chances of being chosen as validators. Proof of Work provides tight security because miners must crack the hash functions to create or validate the new block.

Begin staking

In order to inform the network that Bob should now own Alice’s Bitcoin, the transaction has to be recorded on a publically accessible ledger. For this to happen, miners group together as many transactions as possible into blocks. Since miners have to compete to solve the puzzle, there can be delays in the validation of transactions. This can be a problem for blockchain projects that need to process a large number of transactions quickly. Double spending, a risk unique to digital currencies, is the most common issue that illustrates the importance of consensus to a blockchain’s security. As the name implies, double spending occurs when an individual attempts to use a coin or token more than once.

Proof of Stake vs Proof of Work

After a long period of anticipation, and if final tests go well, the world’s second blockchain Ethereum will probably transition from “proof of work” to “proof of stake” later this month. This means that transactions on the Ethereum blockchain will no longer be recorded by miners that spend a lot of computing power to prove they worked hard to verify transactions. After “the merge”, transactions will be processed by validators, that have staked Ether that can be forfeited if it turns out they were acting in bad faith. The supermajority mechanism introduced by PoS increases the resource threshold that attackers need to carry out damaging attacks.