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December 9, 2024
Last Week we saw history in the making in the crypto world: The Ethereum Blockchain went from a proof of work consensus method to a proof of stake, what is known around the world as “The Merge.” This means that instead of high energy-guzzling ETH mining, Ethereum nodes will instead stake some of their tokens in order to validate the blockchain’s activity. Since they risk their own tokens, it is in their best interest that things will go well for the network.
The Merge is a real revolution: The Ethereum Blockchain runs the ETH token, most of the NFT market, and many layer-2 solutions such as Polygon. All of this adds up to the economic activity in the scope of over 60 billion dollars. The Merge will save up to 99.9% of the blockchain’s energy consumption. It is a big deal since one of the strongest objections to Crypto was that crypto mining is causing greenhouse gas emissions. As for Ethereum, this problem is no longer relevant: Out of the top-ten crypto coins, only Bitcoin and Dogecoin are working on a proof of work consensus method (Following the Merge, GPU prices are down globally, and it might mean we are at the end of crypto mining).
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It is worth mentioning that not all loved The Merge: Some of the Ethereum Community have decided to “Fork,” meaning split themselves from the upgrade and maintain their own Ethereum in a POW mechanism. As of now, this move is considered a major failure.
The term “Merge” addresses merging the old Ethereum network with The Beacon Chain, a mechanism that allows token staking for the blockchain. But this Merger is just a piece of the puzzle. As Vitalik Buterin, Ethereum’s co-founder and visioner, said last Week: “This is the first step in Ethereum’s big journey towards being a very mature system… To me, the Merge symbolizes the difference between early stage Ethereum and the Ethereum we’ve always wanted.”
Vitalik refers to more issues that need a solution in Ethereum: high gas fees and low scalability. Those are expected to be solved in the next system upgrade named “Sharding”, sometime in 2023.
The Merge was a big success and was completed without a glitch. However, the crypto market did not respond to it enthusiastically: ETH price has declined to 1,500 USD per Token. Though ETH is not at its worst days, we are very far from the height of almost 5,000 USD per token. A successful merge was already priced in the ETH’s rate.
This means that in the near future, The Merge won’t really affect the crypto market. For the average crypto trader, technologically or financially, there isn’t much of a difference so far. Crypto winter is still out there, and The Merge is not a game changer in that respect. However, Long term. The Merge will aid in building trust in the Crypto Market. As Solana’s co-founder, Raj Gokal, said: “We want to see the Merge succeed. It’s good for onlookers to the crypto industry to see big upgrades, release and be successful”.
Solana is Ethereum’s biggest competitor. If Solana is rooting for Ethereum, that means something about the future of Ethereum and its connection to the future of Crypto. If Ethereum succeeds, Crypto will Succeed.
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