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The Merge has recently been one of the hottest topics in the crypto industry. Against the previously predicted August timeline, developers have come to an agreement on the much-anticipated Ethereum (ETH) transition, The Merge, which will take place on September 19, 2022. The Merge is a long-awaited milestone in the crypto space that will undoubtedly transform the industry, but what does The Merge mean for ETH & the crypto space?

Introducing The Merge

The Merge is the milestone at which Ethereum switches from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism. Meanwhile, the consensus mechanism itself is the process by which blocks are formed, crypto transactions are validated, and completed. In other terms, a consensus mechanism is a system that governs how a blockchain operates.

When compared to Proof of Work (PoW), Proof of Stake (PoS) has a few unique advantages.

• Reduces energy consumption by over 99%.
• More decentralized.
• Better protected (with the threat of increasingly expensive costs to attack the network).
• Reduces the intensity of ETH issuance (potentially turning ETH into a deflationary asset).
• Improves network scalability.

As a result, Ethereum 2.0, which uses PoS, will be able to operate publicly.  As of now, Ethereum has implemented a PoW mechanism, which allows for mining activities. ETH will be switched to PoS, allowing for staking. The Merge is one of the most important advancements in the Ethereum network’s history, and it will be the most major shift.

The Merge Stages

Prior to reaching the mainnet stage of The Merge which will take place on September 19, Ethereum has held several public testnet phases. In this series of testnets, there are three established test networks, in which all three have successfully broadcast smoothly. The three testnets are:

• Ropsten, successfully migrated to proof of stake last June.
• Sepolia, successfully migrated to proof of stake last July.
• Goerli, successfully migrated to proof of stake in August.

The Merge’s Effects on Ethereum & Crypto Sector

In the midst of the Fed’s policy to suppress inflation by raising interest rates, the crypto industry has also been affected to some extent. Until now, the crypto market is still experiencing a bearish trend, but many expect the crypto winter to end soon. Of the many factors that will make the market recover, one of them is The Merge.

Effects on the Ethereum Network

Once Ethereum has successfully transitioned from PoW to PoS consensus mechanism, the Ethereum network will have significantly increased speed, efficiency, and scalability. This PoS consensus model is expected to make the Ethereum network faster and more energy efficient.

Effects on the Crypto Sector

• Recovery in the Crypto Market

According to multinational investment bank JPMorgan Chase, The Merge Ethereum’s transition agenda from Proof-of-Work (PoW) to Proof-of-Stake (PoS) consensus will drive a major recovery in the crypto market.

• Institutional Adoption Increase

Besides that, The Merge is believed to have a positive impact on growing institutional adoption. Bloomberg Intelligence seems to have a similar view. Through a report, they said that the transition process could accelerate Ethereum’s journey to institutional-grade investment.