- The Merge was replete with both doomsday forecasts and highly optimistic projections of what would happen next.
- While The Merge has been successful, substantial risks remain, especially given the likely creation of copies of Ethereum that remain stuck on Proof-of-Work.
In the run-up to the year 2000, doomsdays prophesies of aircraft falling out of the sky and nuclear holocaust ran amuck, as the world was gripped in collective horror at the prospect of computers which had come to control much of the modern world changed dates.
By convention and as a shortcut, the year in computers was recorded using just 2-digits, for instance “98” was intended to represent the year 1998 in programs.
But when the world crossed over into the year 2000, that year would be represented by “00,” which could mean the millennium, or a shift back to 1900, possibly causing massive amounts of turmoil for anything that relies on computers.
In similar fashion, “The Merge” – as the software upgrade of Ethereum is otherwise known, was replete with both doomsday forecasts and highly optimistic projections of what would happen next.
As the world’s most heavily-used blockchain, Ethereum is arguably the most important commercial highway in cryptocurrency, with about 3,500 active decentralized applications from games to finance, built on top of it.
Seven years in the making, The Merge would see Ethereum shift from the energy-hungry Proof-of-Work method of securing transactions, to the far more energy-efficient Proof-of-Stake system.
By some estimates, The Merge will help reduce Ethereum’s energy consumption as a blockchain by as much as 99%, making it a more approachable blockchain for institutional players for whom ESG concerns have otherwise kept them away.
Further upgrades to Ethereum will make the blockchain faster and cheaper, and more importantly, the circulating supply of Ether will start to decrease, which has some betting on a long-term increase in the price of the token.
So far however, The Merge has been more of a non-event, especially in terms of price action, although it is still too early to tell.
Significantly, The Merge has been successful purely from a technical standpoint, which is a huge achievement, given the number of things that could have gone wrong, although the coming weeks and months will reveal any lingering bugs or other issues not spotted by developers.
Staked Ether is expected to now generate a yield of around 5.2% in Ether terms for those locking up Ether to secure the Ethereum blockchain.
While The Merge has been successful, substantial risks remain, especially given the likely creation of copies of Ethereum that remain stuck on Proof-of-Work.
These copies or forks, and the existence of several versions of Ether, each running on their own discrete version of the original Ethereum blockchain, is likely to create confusion and become fertile ground for fraud, including double-spending of similar-looking and sounding tokens.
