Ethereum (CRYPTO: ETH)'s initial test network Ropsten is initiating its shift from proof-of-work to proof-of-stake. The highly anticipated network upgrade stands to be only a consensus layer change, with no change to the execution layer.
What Happened: As Ethereum ventures into the next phase of its long term roadmap, it is entering the proof-of-stake model. In other words, this merge seeks to enable the ETH token itself to verify transactions, rather than requiring actual mining machines.
The merge promises to improve the network’s speed, strength, and quality, with the intention to increase security and minimize energy consumption. It is important to note the primary endeavor of this testnet merge is in preparation for the mainnet merge that is expected to occur later in 2022.
According to Forbes, given that this is only a change to the consensus layer, gas fees and transaction speeds remain unchanged. The Ethereum Foundation indicated this merge will occur Wednesday. Recent updates suggest that this merge may be occuring imminently according to hashrates as of late Wednesday morning.
Why It's Important: By enabling Ethereum staking, the network is enabling investors to earn rewards on their initial investment. This promotes ETH from a cryptocurrency to hold into a return-bearing asset.
Furthermore, if the network is able to effectively increase its capacity as intended by this upgrade, there will be a larger user network.
The Last Word: This improvement could help Ethereum regain market dominance that has been lost in the past two years to competitor networks such as Solana (CRYPTO: SOL).
Although this merge serves solely as a trial run for the mainnet merge, the successful functioning of the newly transitioned Ethereum nodes will serve as promising news to ETH holders.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.