I am very much curious to know what algorithm Ethereum is using and what is the impact of this algorithm in the current blockchain .
Ethereum currently uses a Proof of Work algorithm called Ethash, implementation details of which can be found on the wiki.
The plan is to move to a Proof of Stake algorithm called Casper at some point in the future. Current estimates from Vitalik put the chances of moving to PoS in 2017 at between 50% and 80%.
Further details about Ethereum's proposed use of PoS can be found at the following places:
- How Casper works: How does the Casper proof of stake algorithm work?
- PoS FAQ wiki
- Vitalik's PoS Design Philosophy
- A 5-part write-up of the history of Casper (part 1 is here)