This is part one of a series on the Merge. In part two, we will evaluate the impact that the Merge would have. In part three, we will learn how the Merge will work. And in part four, we will look at what you need to do to prepare for the Merge.

The Merge will be Ethereum’s biggest ever upgrade. It may also be the most significant and highly anticipated event in the history of cryptoassets. Yet, despite that, the Merge is poorly understood.

So, in this series, I will take a beginner-friendly look at what the Merge is, what it means for Ethereum, and what you need to do to prepare for it.

Let's start by understanding what the Merge is.

What Is The Merge

The Merge is the name of the process that will transition Ethereum from Proof of Work to Proof of Stake.

What Does That Mean?

That probably doesn’t mean much to most people, so let’s break it down a bit more.

This is all about the fundamentals of how the Ethereum blockchain works.

Blockchains don't have any kind of leaders or authority figures by design. That means there is no one to define and update the "official" history of the chain and its transactions. Instead, that responsibility is shared equally across the network; every participant maintains their own, individual record of events. But a blockchain wouldn't be useful if it were just a loose collection of people doing their own thing. So, a blockchain needs something to keep its members in sync and aligned around the same history.

This is where things like Proof of Work and Proof of Stake come in.

You can think of them as different kinds of lottery mechanisms that elect temporary leaders for the network. Winners get the opportunity to propose a block of transactions to everybody else. Everyone then checks if the block is valid according to the blockchain's rules and adds it as the latest entry in their record of events if it is. The block producer receives a financial reward for doing a good job, and the network remains in sync as it progresses.

How Do These Lotteries Work?

The Proof of Work (PoW) lottery is effectively a guessing game with added math.

Participants in the game are called miners. Their job is to guess a number, plug it into a mathematical function, and calculate the result. If that number is smaller than a target set by the blockchain, the miner wins. If it's larger, they discard their result and try again, using a different number at the start. The game will continue until a winner emerges, and there is no limit to how many attempts a miner can make.

On the surface, this sounds easy. But, there are a few complications. For example, the mathematical functions used in PoW are hashing functions, which have some special properties. The most important of these is that they deterministically produce unpredictable gibberish. By this, I mean a given input will always produce the same output, but that output will look random and unpredictable, following no obvious pattern. It's impossible to know what a hash function will spit out until the calculation is complete. It's also impossible to work backwards from a desired answer. So, miners have no choice but to play the game properly. They must keep guessing and calculating until they, or someone else, stumble upon a successful solution.

The miner with the best chance of winning is the one who can calculate hashes fastest. They will be able to make more guesses than anyone else and are therefore more likely to find a winning solution. As better and more powerful computers can make faster calculations, PoW incentivises miners to accumulate as much computing power as possible. A given miner's chance of winning will be proportional to their share of all miners' computing power.

The Proof of Stake (PoS) lottery is closer to what you might expect from a lottery system.

Participants, known as stakers or validators, must lock (stake) their funds in a special staking contract. The more they stake, the more likely they are to win. An algorithm is used to periodically select a winner from the pool of validators, and every validator remains in play until they either misbehave or choose to unstake their funds.

All of that is generally true, but different PoS systems can vary quite significantly. For example, some threaten to destroy (slash) the staked funds of any validator who misbehaves. Some require validators to constantly vote for blocks they believe are valid. And some allow users to delegate their stake to others, who will produce blocks on their behalf.

Are PoW & PoS Consensus Mechanisms?

PoW and PoS are often called Consensus Mechanisms. And, that name makes sense -- after all, they are used to help everyone in the blockchain come to a consensus about the order of events. However, technically they aren't consensus mechanisms.

If you want to be accurate, you can say they are Sybil resistance mechanisms. A true consensus mechanism pairs a Sybil resistance mechanism with some rule to help choose between conflicting versions of a blockchain. For example, both Bitcoin and pre-Merge Ethereum use a consensus mechanism called ‘Nakamoto Consensus’. This combines the PoW lottery system with a rule that effectively says "the longest chain is the official one".

Still, for simplicity — and because everyone else does it — we’ll keep referring to PoW and PoS as consensus mechanisms.

Do They Do Anything Else?

Hopefully, it’s already clear that these consensus mechanisms are essential to maintaining a functional and orderly blockchain. Without them keeping everyone aligned, things would quickly fracture and fall apart. But, it’s probably not obvious that they are crucial to a blockchain's security.

If it was easy to manipulate the consensus mechanism, an attacker could take over a blockchain by repeatedly winning the right to produce new blocks. It would be like turning on god mode. The attacker would have the power to enforce censorship against specific users, and they might even be able to alter the blockchain's history to undo previous transactions.

Now, nothing is infinitely secure. No consensus mechanism can perfectly protect a blockchain. But, they can — and should — make it extremely difficult and expensive to attack.

This isn't always the case. Some blockchains, including relatively valuable ones like Ethereum Classic, have been attacked multiple times in the past. It's actually surprising it doesn't happen more often. Perhaps it's because most blockchains just aren't valuable or notable enough to make good targets. But a successful attack on something as significant as Bitcoin or Ethereum could be devastating, and the perpetrator could make a lot of money. As a result, it's reasonable to assume that these chains are under constant threat, and any weakness will eventually be exploited.

How Does The Merge Fit Into This?

I mention all this to highlight just how important a consensus mechanism is. It's not just a functional tool to choose block producers, it's a blockchain's protection against a dangerous world. It would be a big deal to suddenly disrupt and change it. But, that's exactly what the Merge will do as it doing as it swaps Ethereum's current PoW for a new PoS mechanism.

If you've already heard people talking about the Merge, you've probably heard a few analogies for it. The most popular is that the Merge is like changing a car's engine while it's driving. I like that comparison, but I think it can be taken a step further.

We've seen that a consensus mechanism is a bit like an engine that keeps the blockchain chugging along. But, we've also seen that it's like armour around the chain, protecting it from attack. Therefore, you could say the Merge is like a tank or armoured vehicle changing both its engine and armour, all without stopping while patrolling enemy territory.

It’s a massive engineering challenge, fraught with danger and complexity, and no one has done anything like it before.

What's more, the Merge is the result of an entirely decentralised governance and development process. It is the culmination of 6 years of work by countless individuals distributed all over the world. Despite working for a variety of organisations, each with their own agendas and ways of working, and despite lacking a clear leader who could force changes through, they have successfully collaborated to make the Merge a reality.

On top of that, a successful Merge will require the coordination and cooperation of thousands of people making up the Ethereum network.

Therefore, this update will be more than a massive technical achievement, it will be a triumph of human collaboration. If all goes well, then Ethereum really will be making history with The Merge.

So, that's the Merge. Ethereum's shift from PoW to PoS.

But, why has Ethereum gone through all this risk and effort? What does it stand to gain from the Merge? That's exactly what we'll be looking at in part two.