The Ethereum Merge has been completed – and the industry is observing the impact with bated breath.
The Merge has seen the blockchain network move from an energy-guzzling proof-of-work system – where mining rigs solving complex mathematical problems validate blockchains, as also seen with Bitcoin – to proof-of-stake.
Merging the Ethereum mainnet with the proof-of-stake beacon chain has made the network immediately faster and more scalable, as well as 99% more energy-efficient.
It took place when the network reached a total terminal difficulty of 58750000000000000000000, after which the next block was produced through PoS.
Ecosystem participants can ‘stake’ ETH – the world’s second most valuable cryptocurrency – to become the new validators of the network. Users able to stake 32 ETH are eligible and are assigned to produce blocks at random. Users can also pool ETH for staking.
Participants in the ecosystem need do nothing – except to be aware of scams inviting people to join staking pools, upgrade their accounts or access fake airdrops.
At the time of the Merge, just over 11% of the total circulating ETH was staked.
Sean Dickens, a crypto analyst at Kinesis Money – one of the world’s largest digital asset platforms – says the Merge will introduce some barriers for those wishing to stake.
“Firstly, stakers will be unable to withdraw their staked ETH until the Shanghai network upgrade, which is set to take place in mid-2023. Secondly, to stake ETH as a validator, you need a 32 ETH ($49k) minimum commitment to participate,” he says. “For the everyday crypto enthusiast, these criteria are a potential barrier blocking their involvement.”
Anton Chashchin, managing partner of Bitfrost.io – a financial ecosystem helping financial institutions to adopt cryptocurrencies and blockchain – says the Merge is an important event for both the blockchain itself and the entire community.
“It promises to eliminate high fees on the network, significantly increase the speed of transactions and reduce the negative impact on the environment,” he explains.
“In terms of price impact, Ethereum is largely subject to general market trends, which have not been encouraging due to the connection of the cryptocurrency market to the stock market, the aggressive policy of the Fed and the extremely active regulatory activity, such as the MiCA deal introduced by the EU government, which I think will support the overall trend.
“However, the price of ETH will not drop much as the staked assets will not be unlocked immediately after the Merge, as this is necessary to secure the network and ensure consensus. ETH will be issued in tranches, not all at once, so it will seep back into the markets instead of flooding them.
“I don’t think we should expect ETH to move sharply.
“The Merger is a positive step for the Ethereum ecosystem which may have a positive impact on DeFi too. Even if the industry is cleaned up and corrected in the future, it will have more growth potential, and investors will benefit from the Merger in the long term.”
Stefan Rust, CEO of blockchain development house Laguna Labs a serial entrepreneur and former CEO at Blockchain.com – says “the merge is very big news for crypto and it is also increasingly big news for the wider world”.
“When Google adds a feature to its search engine like a countdown timer to the anticipated event, you know the buzz is spreading,” he explains.
“ETH will almost certainly be at $3,000 by the end of the year. If and when this happens, and if bitcoin stays around the same level it’s at right now, we will see the so-called ‘Flippening’ – when the market capitalisation of Ethereum overtakes the market capitalisation of bitcoin.
“This really could happen this year, and if not it will almost certainly happen next year.
“This is a pretty bold claim, I know. However, bitcoin has somewhat lost its way. It’s been appropriated by traditional finance houses and institutions, which are now using it as any other kind of alternative investment asset.
“As such, while main markets remain depressed, bitcoin has almost no momentum to go higher. Bitcoin is moving in lock-step with global stock markets which are going to remain flat or down until the US and the rest of the developed world get a grip on their inflation situation.”
“In the meantime, Ethereum is growing into its title as the world’s computer with aplomb. The Merge will see transaction speeds go hyperbolic, it will see carbon emissions shrink to almost nothing, and it will pave the way for a period of development that will make 2018 look like kindergarten.”
He adds: “We may also see some infighting, with the merge almost certainly leading to a fork that will see now redundant ETH miners move to another chain where they can continue to mine another form of ETH. Certainly right now, mining ETH is much more profitable in US dollar terms than mining bitcoin.
“If the miners are able to pull together and develop a truly viable solution here, that could also be an interesting project to watch.
“Currently, though, that poses a threat Vitalik needs to worry too much about. The world is waiting with bated breath on the merge to Proof of Stake and we are all excited to see what that will look like.”
Marius Ciubotariu, co-founder of Hubble Protocol – behind the censorship-resistant USDH stablecoin borrowing platform for the Solana DeFi community – says “the importance of this event cannot be understated”.
“The Ethereum Merge is a gigantic technical undertaking to upgrade the network and is an essential step towards building out Etheruem 2.0.
“Carbon emissions are frequently the stick with which traditional finance and global regulators like to beat cryptocurrency, and so this new development will take the fuel out of that fire.
“Of course, emissions remain a huge issue for bitcoin, which is using ever more energy to mine the last one million coins left and has little to no chance of moving to a PoS model anytime soon.
“It could be that the world, including cryptocurrency traders, are finally waking up to the huge potential that exists in Ethereum and the possibilities provided by decentralised finance projects beyond bitcoin.
“It’s a really exciting time to be in the space and we look forward to watching the progress of the Merge from here.”
Kevin Murcko, CEO and founder of crypto exchange Coinmetro, adds: “Rumours of Ethereum’s big merging event have turned into anticipation, leading to a monumental surge in the price of Ethereum-based tokens and coins.
“Traders are seemingly exercising one of the oldest tricks in the book: ‘buy the rumour, sell the fact’. I would not be surprised to see a price drop in the second half of September. But that won’t stop retail investors, driven by FOMO, from filling their bags in the meantime.
“In the long-term however, the Merge will undoubtedly have a positive effect on Ethereum… there are still a number of risks on the horizon, not least how exchanges will deal with the uncertainty surrounding the Merge, but any disruption is likely to be minimal, as it’s in everyone’s interest that the Merge is successful.”
Cryptocurrency shorts
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Crypto prices
The overall market cap of the more than 20,900 coins is at $983 billion at the time of writing (7.45am UK), a 1.4% decrease in the last 24 hours.
For round-ups of recent cryptocurrency news developments, click here.
For valuations of the top 100 coins by market cap in US dollars, plus 24-hour price change, see below.