The cryptocurrency world has grown rapidly over the past few years, and it's hard to believe that there were only around five or six cryptocurrencies in existence when Bitcoin was introduced. There are thousands of different cryptocurrencies available, each with different features and functionality.
Could two existing cryptocurrencies ever merge to form one currency? Is that even possible? If so, how would it work? Would it be good or bad for the blockchain industry? This article will answer these questions by explaining the Merge and how a blockchain with a native cryptocurrency can be forked into several other coins.
Can Cryptocurrencies Merge?
Many digital currencies have either come from forks of previous coins or been built from scratch. There are over 20,000 digital coins in existence. But what about when these different digital currencies make sense for each other?
Is it possible that two different cryptocurrencies could merge into one cryptocurrency? What would such a situation look like, and how might it work?
A major example that springs to mind is a proposed combination of ShadowCash and Darkcoin, Dash's precursor. However, it wasn't particularly a merger, but a collaboration that led to the extinction of one (ShadowCash) and the expansion of another (Darkcoin). The developers already planned a distribution mechanism to mine new Darkcoin tokens and distribute them to existing ShadowCash token holders in a 1:10 ratio. Hence, for every ShadowCash token, Darkcoin holders get 0.1 tokens as airdrops.
Due to the nature of this merger, the ShadowCash development team had to abandon their project, thereby terminating the ShadowCash chain, and join the Darkcoin team to work together on the new merged coin. Hence, the tokens didn't technically merge, but the two projects collaborated to combine strength and build on a single chain.
What Is "The Merge"?
This Ethereum upgrade, or "Merge," as it is referred to, has altered how new crypto transactions are recorded on the Ethereum blockchain. In the past, the Ethereum blockchain operated on a proof-of-work basis, in which nodes (computers in a huge network) competed to solve complex arithmetic problems. Successful miners can then mine the following transaction block and generate additional currency.
The upgrade moved Ethereum to a proof-of-stake system, which is more energy-efficient and ecologically beneficial. It comprises nodes chosen by an algorithm that prefers nodes with more of a network's currency.
The upgrade is commonly referred to as "the merge" as it involved merging the Beacon Chain (where staking was tested) to the Ethereum mainnet blockchain; hence, making it possible for the network to transit from PoW to PoS.
How About A Hard Fork?
A hard fork doesn't allow two currencies merge, and in fact is the direct opposite, as it involves the split of a blockchain into two, allowing new cryptocurrencies to be created.
Several cryptocurrencies have been created as by-products of hard forks, most notably Bitcoin Cash and Bitcoin Gold from the original Bitcoin blockchain as well as Ethereum Classic and EthereumPOW from the Ethereum network. occurs when nodes of the most recent version of a blockchain no longer accept the prior version(s), resulting in a permanent divergence from the previous version of the network.
Therefore, by definition; no, two or more cryptocurrencies can't merge with each other into one; instead, one chain may be abandoned for another as occurred with Darkcoin and ShadowCash.