3 Reasons to Be Excited for the Ethereum Merge

After years of planning, work, and anticipation, all it took was 15 minutes for the network upgrade known as the Ethereum Merge to be complete, joining the existing execution layer of Ethereum with its new proof-of-stake consensus layer, known as the Beacon Chain. For more on the Merge itself, and why it was needed, review one of our previous posts on the subject.

Proof-of-stake is a cryptocurrency consensus mechanism for processing transactions and creating new blocks in a blockchain. Proof-of-stake (POS) was created as an alternative to Proof-of-work (POW), the original consensus mechanism used to validate a blockchain and add new blocks.1

1 Frankenfield, Jake, What Is Proof-of-Stake (PoS)? https://www.investopedia.com/terms/p/proof-stake-pos.asp

Now that the much anticipated blockchain network upgrade is complete, what does the Eth Merge actually mean for enterprise and financial services participants, and how will it impact end users, or more specifically, customers?

 

1. Total energy savings from the Merge is hard to determine, yet significant

The Merge signaled the end of proof-of-work for Ethereum and started a new phase of development with a more sustainable, eco-friendly Ethereum. Until now, as the popularity of cryptocurrencies grew, so did the general public’s environmental concerns. However proof-of-stake uses validators instead of miners, which helps significantly cut energy use by some estimates of up to 99.98%

With government officials and environmentalists quickly joining the chorus of those wanting to insert guardrails around crypto’s energy consumption, this becomes more important, and even more timely. On the flip side, the network can hopefully discard its label as an energy glutton, which should make it more attractive to participants from all parts of the world.

 

2. The Merge will result in further connectivity and greater engagement

Perhaps the biggest long-term news is the Merge will encourage greater financial inclusion and innovation. As greater network efficiency is established, the potential environmental impacts will become a thing of the past – an obstacle to growth until now. 

As more users join the network, seeking new and better services, the network will also be inspired to grow and develop. And because users can stake their tokens on the Ethereum blockchain and earn yield, we can expect to see expanded growth as more users join the network to try to profit from staking. 

Staking is the act of depositing 32 ETH to activate validator software. As a validator, you’ll be responsible for storing data, processing transactions, and adding new blocks to the blockchain. In return, rewards for actions that support the network and help it reach consensus.2


2Staking with Ethereum, https://ethereum.org/en/staking/

1 Frankenfield, Jake, What Is Proof-of-Stake (PoS)? https://www.investopedia.com/terms/p/proof-stake-pos.asp

 

3. The Merge sets the stage for further network upgrades

Longer term scalability plans include scaling through rollup contracts and L2 networks by moving the majority of transactions to a separate layer that would still be secured by the underlying Ethereum network. The Merge was actually just one of a long line of improvements in the works with the goal to make Ethereum the de facto blockchain settlement layer. These upgrades would not be possible without first transitioning to proof-of-stake.

The specific implementation details are still rapidly evolving, but given the recent success of layer 2 technologies to scale transaction execution, the most immediate enhancement required is to improve data availability. To learn more about this and the current Ethereum roadmap now that the Merge is complete, read through Delphi Digital’s breakdown.

 

Looking ahead

It may have taken years to complete – or minutes – depending on how you view it, but the real news is that the Merge’s impact mostly lies ahead of us. Lessons learned from the experience, on both the technical and the business narrative sides, will continue to inform both enterprises and crypto owners for years to come. 

Long-term value from the Merge to the network is likely to expand as well, with more engagement and scalability innovations, which in turn redistributes that value throughout the network eventually making its way to end users. 

The Merge was a resounding success – marked by a moment in crypto’s history where both community and technologists joined forces to push forward the work that came before us, and in doing so, helped to create a better crypto experience for everyone.  

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