“The Merge”, the XXL cryptographic event of the Ethereum blockchain

Westend61 / Getty Images / Westend61

Westend61 / Getty Images / Westend61

The Ethereum cryptocurrency is undergoing a major shift this Thursday, September 15th.

“The Merge”: in English, the merger. Prepared for months, it should take place on Thursday 15 September, and marks a new page in the history of cryptocurrencies for those who know the sector, changing the technology on which one of the most popular at the moment, Ether, operates.

To understand what is at stake in this merger worth over 200 billion euros, which could also interest the general public and not just speculators, we must start by explaining how the currency affected by this extraordinary event works.

Ether is an existing cryptocurrency thanks to blockchain technology. To be more precise, it works on the Ethereum protocol. A program launched in 2015 with resounding success: today Ethereum is the most used blockchain in the world by cryptocurrency enthusiasts, immediately after the famous Bitcoin.

There are currently 71 million online wallets set to pay with Ether or receive this virtual currency. Today, more than 120 million Ether have been issued, each worth over € 1,690. Their total value therefore reaches 228 billion euros.

55,000 euros for a transaction

What will happen on September 15th that is so important? With “The Merge”, Ether changes the software in a way. Until now, every transaction made in Ether was authenticated by another remote computer, chosen on the blockchain: this is why the functioning of this cryptocurrency is described as “decentralized”.

In order to carry out this check, from which he withdrew a tiring and stumbling payment, he had to solve a very complex equation faster than the others. The first computer that solves the equation becomes a validator, which will then approve the transaction that just took place on the blockchain.

Blockchain is the technology behind bitcoin and other cryptocurrencies. Put simply, financial transactions are encoded and authenticated in “blocks” that add to each other. All this comes in the form of a large public register that is considered tamper-proof, because any modification of the information must be carried out simultaneously by all users.

It is this system, called “Proof of work” that the Bitcoin cryptocurrency still uses today. But Ethereum is about to switch to another system. He will no longer need to solve an equation, but simply put some of his money as a guarantee to become a validator.

Specifically, if X makes a transaction with Y on the Ethereum blockchain, Z will propose to validate it, as before. But to be chosen, this time he will have to immobilize 32 ETH (Ether), or 55,000 euros, by the time of the transaction. This financial risk makes it possible to ensure that the transaction is not fraudulent with respect to the functioning of the blockchain.

This is called “Proof of stake”, which other cryptocurrencies already use to function. Ethereum has been experimenting with it for almost two years, in parallel with its “Proof of work” operation. This merger is an opportunity to fully move to “Proof of stake”.

Fast and energy efficient transactions?

“To give you an image, Ethereum is like an airplane that would like to change its engine in flight”sums up Grégory Raymond, managing editor of TheBigWhale.io, a newsletter specializing in cryptocurrencies. “Ethereum has been flying for nearly two years with two engines running at the same time and the next step this week is to unplug the first and only get the second to work. “

For what ? First, to give this technology a boost. Proof of work is tedious, as it requires the enormous computing power provided by mining farms around the world, which run numerous computer graphics cards to validate transactions.

Cryptocurrency mining facility., No people.

South_agency / Getty Images Cryptocurrency mining facility., No people.

South_agency / Getty Images

Computer graphics cards used to mine cryptocurrencies.

Today, an Ether transaction takes minutes … and hours to validate. Worse still, the transaction could remain in limbo forever, for lack of an available validator.

Proof of stake technology promises fast credit card transactions. And its energy balance, particularly worrying in the world of cryptocurrencies, is even more highlighted by supporters of this merger: Ethereum leaders promise a reduction in the carbon footprint of their blockchain by … 99.9%, with the passage to the betting test. All because it will no longer be necessary to mobilize graphics card farms. This gain, if verified, will not be a luxury: today Ethereum mobilizes 112 terawatt hours, the equivalent of the electricity consumption of the Netherlands.

Wider adoption on the horizon

Does everyone have an interest in the success of “The Merge”? Not really. Server farm owners who have been used for ETH transactions so far will suddenly find themselves out of business. However, there are ways out for Grégory Raymond, who invokes the “other protocols” still using the “Proof of Work”, or even participation in the metaverse sector that “should also require significant graphics resources”.

Other critics worry about the centralization that could result from this change. The richest users, those with 32 Ether to bet (or more than 51,000 euros at the time of publication of these lines), will in fact be the only ones who will be able to participate in the validation. Small portfolios will still be able to participate by pooling their funds on collaborative platforms, but the danger persists that very large players will monopolize the operation.

If these fears are wiped out by crypto enthusiasts, it is because they have high hopes for this change: “In recent years, many large companies have been fleeing the cryptocurrency sector”recalls Grégory Raymond, “because its operation was not compatible with their commitments for sustainable development”. With a greener operation, Ethereum could attract players who have so far been reluctant to use cryptocurrencies.

However, this is one of the thorns in the side of “cryptos”: for the moment, the vast majority of cryptocurrency exchanges are used only for speculation, with uses more than rare in the real world. The slowness of protocols, fluctuating prices or the energy-intensive aspect of these currencies still make them unattractive compared to traditional currencies, for many people.

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