After years and years of delays, the Ethereum merger is upon us. The event formerly known as Ethereum 2.0, when the proof-of-work Ethereum mainnet merges with the proof-of-stake beacon chain, could happen as early as Tuesday.
(If you want a tech-free analogy for Norman friends, I like this charmingly cheesy one from the Ethereum Foundation itself: “Imagine Ethereum is a spaceship that’s not quite ready for interstellar travel. With the Beacon Chain, the community has built a new engine and hardened hull. After extensive testing, it’s almost time to hot-swap the new engine with the old one in mid-flight.”
The eyes of every person in the crypto industry are on this event – or should be.
The merger will make the Ethereum blockchain almost immediately faster, more scalable, and 99% more energy efficient. This should, in theory, be wonderful for Ethereum (both the network and the asset). Whether the price of ETH actually goes up after the merger, or whether it is already “prepared” and not moving is anyone’s guess – and we don’t make any price predictions at all. Decrypt.
But the most interesting part of all this for me is how it will affect all other cryptocurrencies and blockchains.
First, there is the issue of energy.
We may see the Ethereum network hash rate plummet to zero right away, as proof-of-work mining on Ethereum will end. This could put even more public pressure on Bitcoin’s high energy consumption, which Bitcoiners like Dan Held acknowledge. It will also leave Bitcoin alone (without Ethereum as a co-offender) in the crosshairs of regulators targeting energy-intensive proof-of-work blockchains.
Just last week, the White House, in a new report on crypto and energy use, seemed to praise Ethereum and sound the alarm about Bitcoin: It is estimated that ‘Ethereum is 20% to 39%… There have been growing calls for PoW blockchains to adopt less energy-intensive consensus mechanisms. consensus mechanism.
On the other hand, Bitcoiners say Proof of Stake sacrifices network security. And a significant number of Ethereum miners are unhappy with the merger, which will kill mining and leave them with expensive, unusable machines; could they flock to Bitcoin instead?
Second, there are the potential implications for other coins besides the top two dogs, especially so-called “Ethereum killers” like Solana, Cardano, Avalanche, and Polkadot.
You might expect a successful Ethereum merger to benefit these other proof-of-stake cryptocurrencies — and indeed, many of them have received healthy increases over the past week, likely thanks in part to the buzz of the merger. But the reverse is also possible: many of these Ethereum challengers have presented themselves as greener alternatives to Ethereum. Once Ethereum executes proof of stake, they lose that part of their value proposition.
Of course, this is all a matter of image and perception. Ethereum moves to proof-of-stake should silence the critics who shout about how NFTs are destroying the rainforest. This should decouple Ethereum from bitcoin in crypto mining power-hungry conversations. But that may not be the case either, as mainstream narratives around crypto have always been radically misinformed and misleading. There are people (louder and prouder than ever) who will never come to crypto no matter what.
And while Ethereum developers insist there’s nothing major that could go wrong with the merger, “confusion surrounding the event could increase instances of scammers manipulating uninformed users” , Decrypt“Says Sander Lutz.
Finally, as my loyal chronicle readers well know (all dozens and dozens of them, to quote Dean Winters from the latest Allstate “Mayhem” ad), I think the biggest post-merger wild card for l all of crypto, is regulation. SEC Chairman Gary Gensler continues to state that Bitcoin is not a security and he doesn’t mind the CFTC having oversight of it. What about Ethereum? He will not share his point of view. It is widely believed that Gensler and the current SEC regime view ETH as security, despite what former SEC official Bill Hinman said in 2018.
Even if the Ethereum merger is a resounding success, it won’t help much in the long run if it has to reckon with an SEC attack on ETH and all other Ethereum-based tokens.
Watch the news closely during merge week. Stay with us at Decrypt, where our reporting team will be from all angles.
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