Internet & Social Media Law Blog
Ethereum, the second largest blockchain-based platform by market cap, is tentatively scheduled to convert its consensus mechanism from proof-of-work (PoW), which incentivizes miners to solve mathematical puzzles to update the blockchain, to proof-of-stake (PoS), which makes decisions about updates through a vote among holders that have “staked” cryptocurrency that is “at risk” due to bad behavior, on September 15. This software update (the “Merge”) will be a complete overhaul of the system that has been running for the past seven years. For nearly two years, a separate PoS blockchain, called the Beacon chain, has been operating parallel to the original Ethereum blockchain to allow software developers to test and enhance it. The Merge will join both together. PoS will require 99.9% less energy to maintain than PoW and, if successful, the Merge will permit more significant improvements to Ethereum in the future. This would be welcome news for the crypto industry, which has had a very difficult year so far.