The Merge is complete. A massive and long-anticipated software update to the Ethereum blockchain, the Merge went into effect on Thursday, Sept. 15. Its implications are far reaching. The Ethereum blockchain is a pillar of the cryptocurrency environment—its native token, ether (ETH), represents the second-largest cryptocurrency by market capitalization. This article provides an explanation of the Merge, an overview of why it matters and insight on how regulators might respond.

What Is the Merge?

The Merge, as the name suggests, is the merger of two blockchains: the existing Ethereum Mainnet and the Beacon Chain, the consensus layer. The implementation of the Beacon Chain converts the Ethereum blockchain from a proof-of-work system to a proof-of-stake system. These systems are known as “consensus mechanisms,” standards of operation under which participants (nodes) verify and record transactions on the distributed ledger.

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