Our dearest, valued, and perhaps slightly chilly readers,
We are pleased to announce the arrival of autumn on the Aegean coast, and we are happy to now be able to carry a light jacket with us while writing this newsletter. Last week, the only development that caught our attention wasn't just the fact that autumn has officially arrived, but also, as you know, the Ethereum Merge, an event that will delight environmentally conscious crypto enthusiasts*.
Enthusiast: A word that the author apparently coined as a substitute for "enthusiast," but which is already listed as a synonym for "dilettante" in some dictionaries.
Decentralized Bulletin: Ethereum Merge
As you know, blockchain technologies are currently largely implemented using the "Proof of Work" method. So what exactly is "Proof of Work"?
Essentially, this method can be summarized as an algorithm that ensures "consensus" in blockchain technology. As we mentioned in previous newsletters, blockchain technology, in one aspect, has an anti-fraud structure. With this method, the digital blockchain's electrical energy system gains a voice within the algorithm. Fraud is prevented in this way because if you try to commit fraud, you would have to secure the consensus of those who own the electrical energy system and enable its operation, which is nearly impossible.
Nakamoto explains this beautifully in his Whitepaper for Bitcoin. If it were an IP address-focused system, it would become corrupted by acquiring a large number of IP addresses. However, each CPU allows for one voice, and an uncorrupted and unbroken chain allows one to stand out, contributing to the system's honesty and transparency.
So far, so good, but since your ability to have a say is dependent on the electrical energy you provide, looking at the issue from an environmental perspective can be a bit disheartening. Everything is fine, but how are we going to solve this problem of excessive energy consumption?
This combination actually reminds us of a much more logical method: the "Proof of Stake" method. This transition represents a huge change, a revolution in the mining process. With "Proof of Work," everyone could perform transactions based on their processing power and electrical energy, and thus have a say in the ecosystem. With this new method, everyone will be able to perform transactions and contribute proportionally to the amount of Ethereum they own, receiving rewards in return. To better understand this, you can think of systems where shareholders hold management power proportional to their shareholding. The more Ethereum you own, the more transactions you can perform and the more you can contribute to the chain. If you connect a certain amount of ETH to the system—which you need to own to do—you are given the right to create blocks on the blockchain. This chance is given somewhat randomly, but the more shares you own, the greater your chances. In both systems, if you successfully create a block, you receive a reward from transaction fees and newly generated ETH. In the new system, our colleagues who strive to maintain security will also be rewarded.
This system will actually make transactions more secure, but why will it be more secure? We'll discuss that in another newsletter.
This Ethereum update will naturally lead to significant energy savings, and we will finally see the Ethereum 2.0 we've been hearing about for so long. It's being said that it will become a much faster ecosystem as the number of transactions per second will increase. Additionally, this transition will significantly reduce the number of Ethereum tokens created per day, which will affect pricing.
You might ask, why is the word "Merge," meaning "union," being used? Why is a "merger" emphasized instead of an update or a change in methods?
You're absolutely right. There's something we need to remember here. Ethereum was already working on this update; in 2020, it built its Beacon Chain network to develop the "Proof of Stake" method, but transactions weren't possible. Now that this network is ready, this big news is being announced as "The Merge."
We hope you enjoyed reading what we wrote and that it gave you a peaceful start to your Sunday and inspired you on the following days.
Don't make any plans for next Sunday!
share our Decentralized Bulletin profile page with your loved ones and those interested in these topics using the link bit.ly/merkezsizbulten . You can also access all our social media accounts from here . Happy Sunday! ☀️
Originally published on Medium on September 26, 2022. English translation of “Merkezsiz Bülten: #TheMerge”.