At Stake

Ethereum's make-or-break moment nears as crypto readies itself for the big Merge

Monday, August 29, 2022 by Robinhood Snacks |
Ethereum merges lanes (Jackal Pan/Getty Images)

Ethereum merges lanes (Jackal Pan/Getty Images)

The future of finance… aims to leave its past in the dust. The ethereum Merge — a years-in-the-making reimagining of the world's second-largest crypto — is set for mid-September, and crypto fans are HODLing their breath. The Merge is meant to move the chain's consensus mechanism (think: verification process) from “proof of work” (PoW: old, power-hungry) to “proof of stake” (PoS: new, efficient). It's a critical moment for the seven-year-old crypto, with real — ahem — stakes:

  • Eth-ficient: PoS-powered ethereum is expected to use 99.95% less energy by having validators instead of miners add new blocks to the chain. Reminder: validators are people "staking" (aka: depositing and locking up) ether as collateral; miners = tons of energy-sucking computers.
  • Dirt-eth: Right now, ethereum uses as much energy as the Netherlands and emits as much carbon as Singapore.
  • Crypt-oh shucks: The Merge will not actually reduce transaction fees or speed up transactions.

Growing up = growing pains… Dragging a chain worth $202B into the future isn't like flipping a switch. Plenty could go wrong, from bugs to industry consolidation (aka: dreaded centralization). Merge fans argue that if ethereum sticks with the old PoW, it risks getting left behind by new chains on the block (like: solana), but not all of cryptoland's on board:

  • Miner detail: In the new PoS future, ethereum miners (and their costly computer rigs) are no longer needed. One response: a proposed forked PoW ethereum chain living on after the merge (meet: ETHPOW).
  • Mis-stake: Critics worry PoS is less censorship-resistant than PoW, and that validators might be pressured into censoring ethereum at the protocol level.

The Merge is full steam ahead… and crypto's future is along for the ride. Picture a bunch of railroad engineers trying to swap out parts on a moving train — but the train's packed with priceless cargo and can't slow down. That's kind of like the Merge. Getting it wrong risks derailing the ethereum train and everything built on top of it (DeFi, Ape NFTs). If the upgrade succeeds, the train’ll run cleaner and could inspire the broader crypto industry to follow suit. If it fails? Hold on.