Ethereum Is Merging

The idea of a blockchain is that you want to do bank transfers without a bank. You want people to be able to do transactions, and have them confirmed, and have there be some canonical agreed list of the transactions, but you don’t want to trust some central party to do it.

At a high level, the blockchain solution is to confirm transactions by letting everyone keep a copy of the transaction ledger. And then the official ledger is based on consensus among people who have some demonstrated stake in the system. What that has often meant in practice — what it means in Bitcoin and what it originally meant in Ethereum — is “proof of work.” What you do is, you buy a bunch of computers, and you set them to work solving meaningless math problems, and whoever solves the most math problems the fastest gets to confirm a block of Bitcoin transactions, and they are rewarded with some newly minted Bitcoins and then everyone starts over solving more math problems to confirm more transactions. Buying the computers, and paying for the electricity to run them to solve the math problems, demonstrates your commitment to Bitcoin: It would be crazy to spend all that money on computers and electricity to confirm fake transactions, which would undermine the value of Bitcoin and thus of your investment.1