Ethereum, the main commercial route in cryptocurrency, has just undergone reconstruction. According to its co-founder Vitalik Buterin in a Thursday tweet, the blockchain network has finished the largest and most ambitious software upgrade in the cryptocurrency world to date.
Called the Merge, it replaced power-hungry computers that were used to order transactions on the network with a more energy-efficient setup using piles of the network’s native token, Ether, placed in special, so-called staking wallets. As a result, Ethereum’s energy consumption will decline by an estimated 99%.
Such an upheaval has never been attempted in crypto before, let alone on Ethereum, home to about 3,500 active decentralized apps, ranging from exchanges to games and handling billions of dollars worth of crypto. In the works for years, the Merge doesn’t change the end-user experience on Ethereum, but it’s a key stepping stone to more upgrades that will make the network faster and cheaper, and should further increase its stature and usage.
“This is the first step in Ethereum’s big journey toward being a very mature system,” Buterin said during an online Merge viewing party– essentially a public video call where developers tracked live progress on the switch. “And there’s steps left to go. We still have to scale, we have to fix privacy. To me the Merge symbolizes the difference between an early stage Ethereum and the Ethereum we’ve always wanted”, he added.
As it became clear the transition had worked, developers who had worked on the the project for months started congratulating each other on the call. Watched by more than 41,000 people at peak, the viewing party featured content ranging from dry technical explanations of what the Merge would entail, to the performance of a Merge-themed song. Lyrics included: “Carbon footprint is all gone. That’s why we are singing the Merge song.”
The Merge also changed properties of Ether, making it more akin to yield-bearing securities. Staked Ether will generate a return, expected to be around 5.2% after the Merge, according to tracker Staking Rewards. Coupled with an expected net decrease in Ether token supply soon after the update, that should make the coin more attractive to investors.
Ether was up as much as 3% following the merge to $1,654. The token has surged more than fivefold in 2021, outperforming Bitcoin by a wide margin, in part on optimism over the Merge. Both cryptocurrencies have struggled since hitting record highs in November, with Ether down more than 50% this year.
Even though completed, the Merge could be followed by days or even weeks of hiccups, based on what happened after some prior Ethereum software updates. Worried about bugs and hacks, crypto exchanges like Coinbase Global Inc. paused Ethereum-related withdrawals and deposits around the time of the software upgrade. Crypto lender Aave had suspended Ether borrowing in advance of the Merge.
Concern is increased by the potential emergence of Ethereum replicas that continue to employ power-hungry computers known as miners.
These forks produce their own versions of the Ether tokens that are distributed to all holders of mlainstream Ether, such as EthereumPOW.
There may be some value in the tokens.
But the existence of various Ether variants, each of which runs on a distinct chain, may cause confusion and encourage attacks and scams.
It’s also possible for copies of other tokens operating on branched chains.
