eli5 What is The Merge?
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Cryptocurrencies are built on “blockchains”, which are essentially just simple databases but instead of being controlled by a central authority they are controlled by a community. To incentivize people to provide processing power to run the system, users are typically given free cryptocurrency in proportion to the share of the processing power they provide. But the system doesn’t really have a mechanism to prevent people from providing more processing power than is necessary. After cryptocurrency prices took off, it made economic sense for people in certain parts of the world (where energy is especially cheap) to devote huge amounts of processing power to cryptocurrency “mining”, vastly more than is actually necessary to run the systems. There are literally massive warehouses full of computers just doing this 24/7. This has significant environmental and economic impacts. Some people have also created malware that mines cryptocurrency on their behalf on other people’s computers, so they don’t have to pay for the energy costs themselves.
There has therefore been a lot of pressure for cryptocurrencies to switch to systems that don’t incentivize people to waste energy. Some newer, smaller cryptocurrencies are not especially energy-hungry, but until now the biggest ones were. Recently Ethereum, the second most popular cryptocurrency after Bitcoin, made the switch, which has surprised some people as they have repeatedly promised to but kept pushing back the date. The immediate impact seems to be that the miners have simply switched to mining alternative cryptocurrencies, but assuming that Ethereum maintains its substantial market share, this change should make mining less profitable, since the same number of miners are now concentrated in a smaller share of the market.
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