Ethereum’s price surged by more than 40% in mid-July following an announcement by the second-largest blockchain. If you didn’t catch it at the time, you might wonder what kind of announcement has such power to send the price of ethereum surging. It all comes down to the difference between proof of stake and proof of work — two different ways to validate transactions on a blockchain network. In ethereum’s case, a long-planned network upgrade referred to as “The Merge” will shift its protocol from a proof of work model to a proof of stake model. After previous delays, the July announcement set Sept. 19 as the new date for the switch to take place. While the difference isn’t likely to be obvious to casual investors, many experts say proof of stake is a better, more efficient way to operate a blockchain network. “Both proof of work and proof of stake are mechanisms used across these networks to verify transactions,” says Adam Blumberg, CFP, co-founder and president of Interaxis, a firm that educates financial advisors about crypto assets. “However, for financial systems, proof of stake works better.”
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