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By the end of 2022, Ethereum is expected to experience the biggest turnaround in its seven-year history. Ethereum’s consensus method, described as The Merge, will move from proof-of-work to proof-of-stake. Not only will this make Ethereum greener, but the issuance of ETH will also be drastically reduced and set the stage for huge improvements in scalability.
Since its launch in July 2015, Ethereum has used the same consensus method as Bitcoin, called Proof of Work. That all changed when Merge saw a separate chain — the Beacon Chain — which has been running proof-of-stake since December 2000 — merged with the main Ethereum blockchain. From then on, Proof of Stake will be how Ethereum reaches consensus.
The consensus method is how the blockchain (a distributed network of independent computers) agrees on the accuracy of new data in a shared ledger.
For Bitcoin, the new currency system, the shared ledger is updated to reflect recent unused transactions and the amount of Bitcoin held in UTXO (unspent transactions) equals the account balance.
Ethereum operates as a computational engine – described as the world computer – and a monetary system denominated in ether (ETH). Therefore, consensus must be reached on the state of computation (executed through smart contracts) to support digital applications (dApps) and account balances holding Ethereum. Both are documented in something called the Ethereum Virtual Machine (EVM)
