If there is one thing the crypto community has in good supply, it’s promises. In the relatively short history of digital assets — starting with bitcoin in 2009 — evangelists have trailed a list of innovations that, they say, could solve inflation, revolutionize business, or provide a financial lifeline to people living under authoritarian regimes around the world.Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.
By contrast, in a proof-of-stake system such as the one Ethereum is moving to, the blockchain doesn’t need powerful computers for its security. Instead, individuals or companies act as the validators, staking their own ether tokens as collateral against bad behaviour. They are incentivized to do so by rewards, including the chance to earn fresh ether.
Still, after years of talk, a successful Merge at least sets the scene for future innovation, particularly by allowing the Ethereum blockchain to scale and handle heavier workloads. This is good news for the applications that build their businesses on the blockchain, such as the NFT marketplace OpenSea, or decentralized crypto exchanges like Uniswap.
So why does the Merge matter if other blockchains are still guzzling energy and harming the environment? Alex de Vries, founder of the website Digiconomist, claims the Merge could shed approximately 99 per cent of Ethereum’s current energy consumption. Should the Merge successfully inoculate Ethereum against criticism from environmentalists, pressure will grow on its main rival, bitcoin. If one of the two most prominent blockchains can ditch its dirty reputation, why not the other?Article content
“It’s almost like changing the engines on a plane whilst flying it … a significant engineering feat,” says Edward Machin, a senior lawyer in Ropes & Gray’s data, privacy and cyber security practice. A more immediate problem is the tail risk of a whole series of market mechanisms that have yet to be tested in the wild. “Humans are pretty bad at pricing tail risk. I think most people are probably not thinking about , and there are a lot of risks here,” says Garg of Electric Capital.Article contentThe most urgent concern for many Ethereum backers is the existential question that proof of stake presents to “decentralization” — a sacred tenet among advocates of blockchains.
You're missing the bigger picture. The Surge is likely the revolution after the Merge.