Can ‘the Merge’ Save Crypto? , Crypto could use a bit of good news these days. And on Wednesday, it got some. Ethereum, the most popular crypto platform, appears to have successfully upgraded its software architecture from a type of blockchain known as “proof of work,” which it has run since its inception in 2015, to a type of blockchain known as “proof of stake.”
This upgrade, which came to be called, simply, “the merge,” is already being heralded as a watershed moment in the history of crypto. Early Thursday, as the first proof-of-stake transactions were verified, dozens of Ethereum developers gathered on a celebratory Zoom call hosted by the Ethereum Foundation. “This is the first step in Ethereum’s big journey towards being a very mature system,” Vitalik Buterin, Ethereum’s founder, told the group. “To me, the merge symbolizes the difference between early stage Ethereum and the Ethereum we’ve always wanted.”And many crypto fans hope that it will turn things around for the crypto movement, which has been besieged in the past year by trillions of dollars in losses, Can ‘the Merge’ Save Crypto, a string of major scams and hacks, and a new wave of regulatory scrutiny. I’m not so sure it will. But before I tell you why, let’s review some of the reasons that crypto supporters are celebrating. First, it was far from a given that the merge would work. Switching a blockchain’s so-called consensus mechanism — the way that it processes and verifies new transactions — is terrifyingly complex. (Some crypto developers have compared it to swapping out a spaceship’s engine midflight.) Before the merge, nobody had tried such a maneuver on a crypto platform anywhere near Ethereum’s size, and it took years of testing and research (and many, many delays) for developers to get confident enough to attempt one. Ethereum, which is open source, hosts hundreds of billions of dollars’ worth of cryptocurrency transactions, NFT collections and DeFi protocols, all of which could have been irreparably broken if the merge hadn’t gone according to plan.
Something could still break in the coming days. But the merge appears to have gone as smoothly as Ethereum fans could have hoped. The second reason crypto fans are happy about the merge is that the new Ethereum blockchain is much more environmentally friendly than the old one. Ethereum used to be secured by a network of high-powered computers that competed against one another to solve cryptographic puzzles, burning vast amounts of energy in the process. Now, it will be secured by a process known as “staking,” which involves investors agreeing to deposit their crypto coins in a shared pool in exchange for a chance to earn financial rewards. There are other benefits to the merge — it’s expected to make Ethereum faster and more efficient in the long run — but the environmental footprint is the big, immediate improvement. According to crypto researchers, the new Ethereum blockchain will consume 99.95 percent less energy than the old one. That’s a huge change — comparable to the entire nation of Portugal going off the grid, according to Digiconomist, a website that tracks crypto’s energy consumption. And it should help industry advocates make the case that crypto can be green. Third, many crypto fans are optimistic that the merge will be good for the value of Ether, Ethereum’s native cryptocurrency. For reasons that are too complicated to get into here, running the Ethereum blockchain requires destroying (or “burning”) billions of dollars’ worth of Ether every year.Can ‘the Merge’ Save Crypto, The new Ethereum blockchain will still burn Ether, but it won’t need to create as much new Ether to pay out rewards to participants. That means that the overall supply of Ether could shrink, increasing the value of existing coins. In addition, miners — the people who ran those giant, energy-guzzling server farms under the old proof-of-work system — will no longer be forced to sell some of their Ether to pay their electricity bills, which could result in more stable prices. Can ‘the Merge’ Save Crypto, I’ve talked to a number of crypto industry leaders about the merge, and the general feeling they express is one of cautious optimism. It’s been a brutal year in crypto, but now that Ethereum has neutralized one of the most common objections to crypto — the enormous environmental toll — they hope that at least some skeptics will come around. Regulators won’t object as strenuously to Ethereum 2.0, they believe, and companies that experiment with NFTs and other Ethereum-based technologies won’t face as much backlash.
Source: This news is originally published by nytimes