In a few days, Ethereum (ETH), which is the second largest crypto project by market capitalization, will no longer be associated with the proof-of-work (PoW) consensus algorithm mechanism. Courtesy of the merge upgrade set to happen around mid-September, Ethereum will adopt the proof-of-stake (PoS) concept. 

In light of this, several arguments have been put forward by PoW advocates, crypto miners, and Bitcoin (BTC) maximalists, in particular. In a recent scenario, Vitalik Buterin, one of the founders of the largest smart contract platform said in defense of PoS that PoW punishes cryptocurrency miners with insignificant hash power. 

“Proof-of-work (PoW) penalizes anyone who has a smaller percentage of hash power than their percentage of the coin supply. Actually, it penalizes much more than that because profit < revenue,” Vitalik Buterin responded to a PoS critic, Udi Wertheimer. 

And PoW penalizes anyone who has a smaller percentage of hashpower than their percentage of the coin supply

(Actually, it penalizes much more than that because profit < revenue, but you get the point)

— vitalik.eth (@VitalikButerin) September 12, 2022

Read Also: Google Shows Support for Upcoming Ethereum (ETH) Merge

It is worth noting that Udi Wertheimer is a popular Bitcoin maximalist and ex-Blockchain research head at Colu. In a Twitter post, he shared some unpopular viewpoints about proof-of-stake as he aimed to portray the flaws of the consensus algorithm mechanism. Ultimately, he argued that staking rewards are not real yields. 

In his words, “PoS rewards aren’t “yield”, in fact, they’re not even rewards, they are just penalty to people who don’t stake. You don’t get paid for staking, you just get penalized for not staking.”

“Miners and holders are usually distinct sets with very little overlap, so in practice, it’s just holders paying miners. With liquid staking, you can expect holders and stakers to have a huge overlap. So basically just everyone’s balances increase equally.”

He added, “All else being equal, it’s [PoS rewards] better for holders but it’s not yield! It’s just less penalties (also, not all else is equal). 

PoS rewards aren’t “yield”, in fact they’re not even rewards, they’re just penalty to people who don’t stake

you don’t get paid for staking you morons

you just get penalized for not staking

i can’t believe you still don’t get it lmao

— Udi Wertheimer (@udiWertheimer) September 12, 2022

Although Ethereum was created as a proof-of-work (PoS) blockchain, Buterin has always been an advocate of proof-of-stake (PoS), which justifies the approaching Merge upgrade and his soon-to-be-released book titled Proof-of-Stake.

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The anticipation of this upgrade has greatly rekindled investors’ interest in Ethereum’s native token, ether aka ETH. This is noticeable in the recent upsurge in the price of Ethereum, which has caused the token to be among the best performers in recent weeks. 

Similarly, Ethereum (ETH) has been among the most trending digital assets on the leading data-tracking platform, Coinmarketcap. 

Also, an Ethereum ICO-era whale wallet that was dormant since 2019, was spotted moving 145,000 ETH to different wallets earlier in August. This action has left many with diverse assumptions. 

Of course, the Merge upgrade speaks of a major improvement on the Ethereum blockchain. Hence, a price rally will not come as a surprise. On this note, some speculate that the ETH whale intends to carry out a massive sell-off. 

Many others hold to the belief that the whale could be preparing for staking which the Merge upgrade will enable on the largest smart contract blockchain, Ethereum. On the whole, numerous misconceptions have been aired as the Merge upgrade on the Ethereum network approaches. 

Read Also: Ethereum Co-Founder Vitalik Buterin Submits Proposals for Gas Costs Adjustment

The Merge Will Not Reduce Gas Fees 

In a Thursday update, the Ethereum Foundation took time to correct misconceptions regarding the Merge. Among these misconceptions are the topic of gas fees, staking APR, transaction speed, etc. 

High gas fees are among the major challenges users face when using the Ethereum network alongside scalability inadequacies. Therefore, a reduction in network charges tops most users’ wishlist. 

However, it is worth noting that post-Merge gas fees, which is the amount paid to complete transactions on the Ethereum network, will not reduce automatically. Meanwhile, Ethereum’s energy consumption will be reduced by approximately 99.95%. 

“The Merge is a change of consensus mechanism, not an expansion of network capacity, and will not result in lower gas fees. Gas fees are a product of network demand relative to the capacity of the network,” Ethereum Foundation revealed.

The Merge deprecates the use of proof-of-work, transitioning to proof-of-stake for consensus, but does not significantly change any parameters that directly influence network capacity or throughput,” the update added.

Related: Vitalik Buterin: Ethereum (ETH) Will Continue Becoming a More Mature Blockchain Ecosystem

No Significant Change in Transaction Speed

Speaking of transaction speed, it is said that after the Merge upgrade, it will remain the same on layer 1 as the change will be extremely small. Post-merge, blocks will be produced in approximately 12 seconds and not 13.3 seconds any longer. 

In addition, the rumor that running a node requires staking 32 ETH is false. As revealed in the notice, “anyone is free to sync their own self-verified copy of Ethereum (i.e. run a node). No ETH is required. Not before The Merge, not after The Merge, not ever.”

Read More: Ethereum Validator Nodes Set To be Installed in the Capital City of Argentina in 2023

Staked Ethereum (stETH)

On staking withdrawals, it should be noted that withdrawal of staked ETH will not be enabled with The Merge. After the Merge upgrade, which is expected to occur in Q3/Q4 2022, more upgrades will be executed to make the Ethereum blockchain fully complete. 

Recall that Ethereum co-founder Vitalik Buterin earlier stated that post-Merge, the blockchain will only be 55% complete. Therefore, withdrawals of staked Ethereum (stETH) are planned for the Shanghai upgrade which is the next major upgrade after the Merge.

Read Also: JPMorgan: Coinbase Will be a Major Beneficiary of the Fast-Approaching Ethereum (ETH) Merge

The Merge Impact

This will be the most significant upgrade ever since the Ethereum blockchain, the second-largest crypto project, went live. The upgrade will merge the current Ethereum mainnet with the Beacon Chain proof-of-stake system.

More so, the Merge upgrade is designed to mark the end of proof-of-work and mining on the Ethereum network. Cryptocurrency miners will have to migrate to other PoW chains to carry out their mining operations.

Meanwhile, Miners and industry players like the popular Chinese Chandler Guo and Justin Sun are pushing to preserve PoW for Ethereum via a post-Merge fork. However, Ethereum creator Vitalik Buterin does not believe that the planned fork will bring the desired result.

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The controversial project founder is in full support of the planned miner-led post-Merge Ethereum hardfork. This possible post-Merge fork aims to create a blockchain that still runs on proof-of-work (PoW) after  Ethereum is transitioned to proof-of-stake (PoS) in September. 

In a recent interview with CoinDesk TV, Justin Sun pointed out that the proof-of-work (PoW) consensus algorithm provides a good foundation for the Ethereum infrastructure, although the protocol concept is associated with high transaction fees and lack of scalability. 

He claims that the post-Merge fork led by the popular Chinese cryptocurrency miner, Chandler Guo, is a chance to preserve PoW technology for Ethereum in the future. 

More so, the proof-of-stake (PoS) project founder remarked that PoW-based smart contract platforms are essential to the whole crypto industry, citing that the existing PoW projects like Bitcoin (BTC) are not useful in building decentralized applications (dApps). 

“PoW is essential for Ethereum even though most people complain about high transaction fees and very slow transactions. I still believe that proof-of-work actually provides a very good foundation for Ethereum infrastructure.” – Justin Sun stated. 

Asides from saying that PoW is essential, he highlighted the high security the consensus algorithm brings to the industry. 

“Today, around $60 billion worth of crypto assets are on the Ethereum blockchain, all guarded by proof-of-work. I believe that we still need a chance to keep proof-of-work for Ethereum so, that’s why I support proof-of-work for Ethereum,”  Justin Sun added.

Tron (TRX) founder also pointed out that EthereumPoW (ETHPoW), if successful, will allow the large community of crypto miners to keep their financial activity intact. In turn, ETHPoW will be a close competitor with the proof-of-stake Ethereum network. 

According to him, about 50% of the crypto community, especially Bitcoin maximalists and crypto miners, still believes that PoW is safer and more decentralized than PoS networks. Regardless, Ethereum developers confirmed the Merge upgrade will occur in September. 

Although several crypto exchanges, miners, and popular figures like Justin Sun have shown support for the planned post-Merge Ethereum fork, Vitalik Buterin believes the planned ETHPoW network will not succeed nor have a long-term substantial adoption.

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The event played out today after the move was first announced on the 3rd of June 2022 via a blog post published on the official website of the Ethereum Foundation.

Read Also: Buterin Explains How to Create Algorithmic Stablecoins That Don’t Become Ponzis or Collapse

Ropsten has activated proof-of-stake! pic.twitter.com/TKQ8LSJGt6

— ً (@lightclients) June 8, 2022

Ropsten’s proof-of-work PoW) chain was merged with its proof-of-stake (PoS) beacon chain via the combination of their codes.

The test merge recently conducted is critical to check if client software using Ethereum nodes performs without malfunctioning. The Client software teams that participated in the merge include Lighthouse, Lodestar, Prysm, Teku, Besu, Erigon, go-ethereum (get), and Nethermind.

The same process is set to happen later this year with the Ethereum mainnet merge. In effect, today’s event was intended to serve as a major practice session for the mainnet merge, which will see Ethereum transition from PoW consensus to PoS.

A few hours ago in a Livestream, co-founder of Ethereum (ETH) Vitalik Buterin, said:

“I mean, of course, the merge working well for 6 hours isn’t evidence of complete success. There are all of these kinds of longer-term issues around MEV and staking centralization and protection against DOS attacks and things that could potentially bite us 3 weeks after the merge instead of 2 minutes during the process.”

Read Also: Vitalik Buterin Introduces Soulbound Tokens (SBTs), the Future of Ethereum and NFTs

Previous tests included a shadow fork on the main network in April and another test merge on Kiln.

Today’s test is measured by a metric called terminal total difficulty. The merge is considered activated once this level of block difficulty is reached on the proof of work version. The proof-of-work version of Ropsten crossed a pre-set 50 quadrillion measure to protect the merge from any malicious activity by artificially acquiring the hash rate.

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In a recent interview on CNBC with Kate Rooney, Yakovenko stated that it’s necessary for the flagship cryptocurrency Bitcoin to transition to an environmentally friendly consensus mechanism to maintain its popularity and usage.

Anatoly Yakovenko noted:

“This is probably the most controversial thing that you’ll get me to say but eventually if it [Bitcoin] doesn’t move to proof of stake, nobody is going to use it.”

It’s More Efficient to Build a Proof of Stake (PoS) Network

The Impacts of Bitcoin mining on the environment are part of his reasons for suggesting a transition to the PoS network. In the course of the interview, Solana’s co-founder pointed out that it’s simply more efficient to build a proof of stake consensus mechanism, adding that it offers the same level of protection as the energy-consuming proof of work (PoW) network.

Yakovenko noted that Bitcoin’s nature as PoW crypto makes it thrive as a store of value rather than a suitable means of payment, unlike the rising layer-2 ecosystem. He said, “maybe that works for now but we’ll see what happens in ten years.”

It should be noted that Bitcoin was launched as a proof of work crypto in order to protect and prevent the network from double-spending. But these always result in huge consumption of energy.

According to the report recently published by the Solana Foundation, one transaction on the Bitcoin network consumes 6,995,592,000 Joules. On the other hand, one transaction on the Solana network consumes 2,707 Joules.

Chris Larsen, Ripple co-founder, who is currently the Executive Chairman of Ripple’s board of directors, is also in support of the suggestion. As reported in early April, Larsen promised to donate $5 million to the initiative.

Larsen and others even went as far as launching a campaign titled “Change the Code, Not the Climate” in order to canvass support for the initiative.

Speaking about Solana being energy-efficient, Yakovenko said, “I spent most of my career making code as energy-efficient on mobile as I could and I would be ashamed if Solana wasn’t as energy-efficient as possible.”

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According to a report by Bloomberg, Larsen in conjunction with several climate activist groups is launching a new campaign named “Change the Code, Not the Climate.”

Read Also: Ripple’s Request for Extra Time Regarding Redacted Documents Has Been Granted

The campaign is proposed to make people know the effects of Bitcoin on the environment and to also mount pressure on the community to take action on moving its code to a PoS protocol.

In a conversation with Bloomberg, Ripple’s co-founder said the negative aspect of the Bitcoin network is its inefficiency, stating that the network currently consumes as much power as Sweden and this voluminous energy consumption could surge to the same amount of power as Japan within the next 5 years.

Ads campaign that will spread the word has been planned. The campaign intends to mobilize millions of members of Greenpeace and the Environmental Working Group for a push against Bitcoin’s negative effects from the grassroots.

Reacting to the new development, Michael Brune, who is in charge of the campaign, said:

“We are in this campaign for the long haul, but we are hoping — particularly since Bitcoin is now being financed by entities and individuals who care about climate change — that we can compel leadership to agree that this is a problem that needs to be addressed.”

Read Also: MIT Researcher Urges United States: Buy Bitcoin (BTC) Now To Become a Superpower for Next 1000 Years

According to Brune, the campaign plans to canvass the support of a number of firms, including Goldman Sachs, PayPal, BlackRock, and others.

In the report, Chris Larsen acknowledged the effort of Ethereum to transition to the PoS model, which is expected to play out in the coming months after years of development. He also noted newer blockchains, such as Solana and Cardano, which are building on low energy consuming algorithms from the ground up.

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