Digging into the Merge
#Web3Weekly: Sept. 11–17, 2022
Re-sharing below the latest edition of #Web3Weekly, my regular newsletter about decentralization. If you would like to receive it in your inbox every Sunday, please subscribe here.
At last. Ethereum’s long-awaited Merge went into effect late Wednesday PDT, moving the network to a greener, more secure method for verifying transactions on its blockchain.
This upgrade, formally known as Ethereum 2.0, is undoubtedly a major milestone for the web3 movement as a whole. Hence there was much coverage of it by both mainstream news outlets and crypto press last week.
Some highlights:
- The Verge reports that the Ethereum network’s electricity use is expected to plunge 99.988% post-Merge. Digiconomist is making a similar projection, including this eye-popping chart. New York Times tech columnist Kevin Roose mused that Ethereum’s environmental improvement could bolster the general public’s perception of the crypto industry as a whole — though it still has other problems, to be sure.
- ETH miners are scrambling for alternatives. The new proof-of-stake protocol (PoS) in Ethereum 2.0 is much less profitable for miners than the old proof-of-work system’s (PoW) rewards for verifying transactions. Some ETH miners are switching to other coins, Decrypt reports. After the Merge, the hash rates for PoW coins Ethereum CLassic and Ravencoin nearly doubled, according to CoinDesk. Meanwhile, no PoW-based coin is profitable at this point for miners in California once power costs are factored in, according to PC Magazine.
- ETH’s price sagged after the Merge, leaving the token down 17% for the week through Saturday evening. However, the token is still well off its June lows, up 64% to trade above $1,400 recently, according to data from CoinMarketCap. CNBC reports that anticipation of the Merge boosted ETH through the summer, but hedge funds have recently been shorting the token now that the upgrade is complete.
- Users shouln’t expect the Merge to improve transaction speeds or lower fees quite yet, according to Cointelegraph. Those benefits, which are high on the wishlists of many Ethereum users, may take months longer to materialize, depending on additional iterations planned for the network’s software.
- The Wall Street Journal reports that the Securities and Exchange Commission is weighing whether the returns offered by PoS protocols turn such tokens into securities under U.S. law. If so, that would trigger new regulations for ETH and other PoS coins.
- Issuers of non-fungible tokens sought to commemorate the Merge, turning both Ethereum’s last PoW block and its first PoS block into NFTs. The tokens drew little interest from bidders, however.
That’s it for now. Thanks for spending some time with the newsletter today! If you would like to receive updates like this in your inbox every Sunday, please join our email list here.
As ever, a brief disclaimer: This content is intended for journalistic purposes only, not as investment advice. For the latter, please DYOR and consult appropriate financial pros to make the most suitable choices for your individual needs.
Best wishes for a healthy and productive week ahead.
