[Short #80] ETH Merge 🚗🚙🚕

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TPan

Aug 11, 2022

TPan @TPan_nft

Me: *About to share another piece of NFT news* @amuhbell: “Nooooo stop. I need a NFT break.” 🫡

But the news doesn’t stop! Appreciate you future wifey.

Let’s talk about a big complicated topic. The ETHEREUM MERGE.

If it makes you feel better, I was confused for a long time as to what the ETH Merge exactly was. To make you feel even better, I didn’t understand it until about a week ago.

Credit goes to the Bankless Newsletter for their thorough and pretty-easy-to-understand explainer on the Merge. I would put their explainer at a high school to college reading level.

My goal is to re-explain it even more simply the only way I know how. With my patented crude drawings and analogies. Let’s gooooo!

PS: If you’re already familiar with what the Merge is and why it’s important, please note that I am intentionally simplifying my explanations. You want to onboard 100 million more people to crypto? Make it easier to understand 😉

What is the Merge?

It is the process of combining two Ethereum blockchains into one.

Weird to think of right? Let’s look at an IRL example of merging.

Ahhhh…so we’re literally merging two ~~blockchains~~ “lanes” into one.

For most of us, this is a familiar process. However, merging a blockchain of this magnitude has never been done before.

If there is an accident when merging on the highway, it causes a lot of issues. There’s traffic, people might be late to a job interview, it might cause more accidents, everyone’s day just got a little worse.

If there is an ‘accident’ on a blockchain merge, there would be a blockchain version of those downstream effects.

That’s why the Ethereum Foundation (the team behind Ethereum) has been extensively testing this before doing the real thing.

Club Ethereum - Proof of Work vs. Proof of Stake

With the Merge, Ethereum will switch from Proof of Work to Proof of Stake to validate transactions.

Let’s use another IRL example to explain this. Let’s say there’s a bouncer at a club. The bouncer has an important role at the club because they check to see who is on the guest list, who has paid, and who can be let in.

Now let’s make this picture a little more clear:

Club = Ethereum blockchain: It’s a party in here 🪩

Bouncer = Ethereum Node: They make sure the transactions are valid and take note of who’s gotten in the club.

People waiting in line = Transactions that are pending to be confirmed on the Ethereum blockchain. One they’re in, they’re confirmed on the blockchain. Eg: “This jpeg is mine!”

Now here’s the issue with this bouncer at Club Ethereum. To check the guestlist or make sure one of these people waiting in line should go into the club, they have to work. In this example:

Bouncer: Runs to the box office and asks ‘Hey, is Jane Doe on the list?’
Box office: ‘Yup!’
Bouncer: Runs back to the line ‘Hey…*gasps for air* you’re 😮‍💨 in…*gasp*’
Person waiting in line: ‘Thanks!’

So what the is proof of stake then? How would we make the above situation more efficient for everyone involved?

What if the bouncers had earpieces or a walkie talkie? They could stay in the same place (stake), do their job just as effectively, and less energy would be used (no running around!)

What does Proof of Stake do?

More efficient right? Well, how much more efficient?

From an energy consumption standpoint, PoS will be ~99.95% more energy efficient than Proof of Work. Pretty hard for environmentally focused folks to talk crap about ETH after the Merge.

Because PoS is able to be way more efficient without compromising security, they don’t need to “pay” the nodes as much for their work. The Merge will reduce yearly ETH issuance from 4.3% to 0.43%.