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It has been awhile since news about Ethereum's progress on being upgraded from its primitive and high energy consumption technology.
The second-largest blockchain successfully completed its “dress rehearsal” merge with very minor bugs last Wednesday.
The upgrade, known as "the merge" will change the network’s proof of work (PoW) consensus mechanism to a faster, more eco-friendly system known as proof of stake (PoS).
It is reported that this week's merge is one of three "dress rehearsals" Ethereum developers need to complete before a final merge of its mainnet with its newer PoS blockchain, the Beacon chain.
"The merge" will end Ethereum’s reliance on PoW technology.
The most famous blockchain utilising PoW is Bitcoin, and eco-conscious critics are quick to criticise the large amounts of energy being used.
A validator will likely receive a higher yield by staking 32 ether (ETH) tokens as early as possible.
Moreover, a validator will be able to maximise rewards earned directly from the protocol by batching transactions into a new block, checking proposals from other validators and receiving tips from users.
Staking yields might be reduced because the block subsidies are distributed to a higher number of people, hence each validator receiving a smaller percentage of the rewards.
Staking does come with certain risks including validators losing money due to penalties such as going offline or performing unauthorised actions such as like double proposing or double voting.
Besides that, if one stakes before "the merge", their staked funds and rewards are locked up and it is unsure when withdrawals will be allowed.
Ethereum is currently supported by validators or miners to solve complicated math problems in order to record and verify transactions just like the largest blockchain, Bitcoin.
Following "the merge", validators will instead stake coins to confirm transactions, and there are concerns that some validators may reject PoS.
To prevent that scenario, the "difficulty bomb" increases the time it takes validators take to verify and add a transaction to the blockchain exponentially over time till it becomes impossible for the validators to mine new transactions due to near-infinite block difficulty, forcing an end to PoW on Ethereum.
However, the “difficulty bomb” executed at the wrong time could halt Ethereum before "the merge" is completed, leading to series of catastrophic financial outcomes.
ETH has declined over 19% in the past week due to a combination of macroeconomic factors such as the decline of technology stocks and Consumer Price Index (CPI) showing a higher inflation rise with the test merge earlier this week not helping much.
According to CoinMarketCap, ETH has declined over 72% from its all-time high of US$4,891.70 in November 2021.
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