In a nutshell: The Merge upgrade has landed, switching the Ethereum network to a proof-of-stake (PoS) algorithm. The new system reduces electricity consumption by orders of magnitude as it doesn't require miners to validate transactions anymore. As a result, the market might soon get flooded with cheap used graphics cards.
Ethereum has finally switched its consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS). The upgrade, known as the Merge, has been in the works for the better part of a decade and brings several noteworthy improvements to the network.
The first phase of the Merge started on September 6, when the Bellatrix hard fork went live, which prepared the blockchain. Afterward, all that was left to do was wait for the Terminal Total Difficulty block to be mined, which would set off the so-called Paris upgrade. This just happened earlier today.
So, what exactly changed? Ethereum's PoW system worked by having crypto miners compete to write transactions to its ledger by solving cryptographic puzzles (earning Ether in exchange). This process was extremely energy intensive, with a single Ethereum transaction requiring 200 kWh, comparable to what a US household uses in a week. In fact, the whole network used around 78 TWh a year, about as much as Chile.
And we finalized!— vitalik.eth (@VitalikButerin) September 15, 2022
Happy merge all. This is a big moment for the Ethereum ecosystem. Everyone who helped make the merge happen should feel very proud today.
On the other hand, the new PoS algorithm requires validators to hold and stake tokens (min. 32 ETH in this case). It works in a similar way to lottery tickets. The more ETH you stake, the more likely you are to get picked to write a block of transactions to Ethereum's digital ledger, which would earn you rewards. This system is significantly more efficient, with the Ethereum network expected to consume over 99.9% less energy. In turn, this will reduce global electricity consumption by 0.2%.
The Merge is also good news for gamers, as phasing out mining will hopefully avoid another GPU drought like the one we experienced in the past two years. Ethereum miners reportedly generated $733 million in revenue last month. Some will move to other GPU-mineable currencies, while others will sell their rigs to recoup investments. Due to this, used graphics card prices are likely to drop even more, though you should be wary of buying one as they come without a warranty and have been running at full load for weeks or months.