NYT: Understanding the Ethereum Merge

NY Times headline: The Crypto World Can’t Wait for ‘the Merge’

Sub-headline: A long-awaited upgrade to Ethereum, the most popular crypto platform, may make the technology more environmentally sustainable. But it comes with risks.


Aug. 26, 2022

Crypto operates without that middleman. In this alternate financial system, transactions are verified by a scattered network of computers. Anyone can plug a machine into the network by running software that solves complex puzzles, an energy-guzzling process for confirming transactions. Essentially, the computers are racing one another: When the puzzle is solved, the winning participants are rewarded with new coins in the digital currency they are verifying.

This verification process is widely known as crypto mining and has the technical name “proof of work.” By some estimates, the amount of energy consumed each year in mining is comparable to the annual emissions of entire countries.

The Merge is set to shift Ethereum to an alternate framework called “proof of stake,” which requires less energy. In a proof-of-stake system, computers don’t burn energy racing to verify transactions. Instead, crypto investors deposit a certain number of digital coins in a shared pool, which enters them into a lottery. Each time an exchange happens, a participant is selected from the lottery to verify the transaction and win the rewards.