We won’t know right away whether the Merge—the moment when Ethereum’s main network joins with the layer that is using the new consensus mechanism—lives up to its transformative promise. Some of the scaling efficiencies that supporters are excited about won’t even arrive until after the Surge, Verge, Purge, and Splurge—other upgrades Ethereum CEO Vitalik Buterin has promised, which may continue well into 2023. In July, Buterin said he’d consider Ethereum only 55% “done” after the Merge.
In the meantime, a lot could happen. The price of etherEthereum’s cryptocurrency, could move up or down after the initial instability of speculation, and other proof-of-stake coins like Solana and Polkadot could be affected as well. The change could also put Ethereum in more of a regulatory gray area. Some legal scholars have suggested that using proof of stake puts the cryptocurrency at greater risk of being classified as an unregistered security because the fact that validators work alongside one another to approve transactions with the expectation of reward could be viewed as a “common enterprise”; other experts doubt that the argument is strong enough for the SEC to pursue. Buterin has claimed that the Merge makes Ethereum’s network more securebut some experts have suggested that the opposite is the casecautioning users to watch out for “replay attacks” where scammers can record a transaction on Ethereum’s old chain and repeat it without permission on the new one.
Because transactions on the network post-Merge should look more like other financial transactions, traditional businesses that may have shied away from crypto’s unique and energy-guzzling Processes might take a second look at Ethereum—and proof-of-stake cryptocurrencies in general. If they do, the crypto industry could see a makeover in its reputation and user base.
On the other side of the coin, startups built around miners, who have been cut out of Ethereum’s process, will likely need to pivot or refocus on Bitcoin and other proof-of-work networks. Some die-hard Ethereum 1 proponents plan to stick with proof-of-work Ethereum. One popular miner has said he’ll “hard fork” the network, splitting off the code to preserve a separate chain (as some did in 2016 to preserve a previous incarnation of Ethereum). That move isn’t likely to have a large impact on the ecosystem unless the big platforms recognize it; OpenSeathe largest marketplace for NFTs, has claimed it will only support proof-of-stake Ethereum.
Regardless of what happens next, Ethereum’s much-anticipated shift to proof of stake has injected a boost of new enthusiasm and technical possibility into an industry beaten down by constant reports of fraud and legal investigations, plummeting token pricesand public exhaustion with celebrity endorsements and hype cycles. The fact that one of the major crypto players invested time and money laying the groundwork for a less destructive and more efficient ecosystem is an enormous achievement. That signal alone may prove transformative for the Web3 industry, which is still getting steady VC investment and could find new fuel in buoyed public perception.
Rebecca Ackermann is a writer, designer, and artist based in San Francisco. She wrote about the promises of crypto and Web3 for MIT Technology Review’s Money Issue earlier this year.