A Case Study on Ethereum’s Merge Risks and Changes
September 15, 2022, marked a significant change not only for cryptocurrencies but also for businesses in different industries. The event, known as the ‘Merge,’ was highly anticipated, and while it generated excitement in the crypto world, it was also a controversial subject, as some believed it could make Ethereum less decentralized.
Put simply, the Merge can be compared to a software update – only that instead of a smartphone, the update was designed for the 2nd most popular crypto in the world, namely Ethereum. But this was not just an ordinary update: the project has been in the making since 2017. Through the Merge, the Ethereum network shifted from PoW to PoS, which had significant implications for controversial topics in the crypto space, such as decentralization and energy usage. While smaller crypto platforms have managed production through PoS before, the heft of Ethereum is unique, representing a revolutionary change in the crypto space that may go as far as impacting the overall economy.
As a report from the CCRI suggests, the Merge reduced Ethereum’s carbon footprint by almost 99.99%, making the platform a role model for other industries looking to reduce their energy consumption. According to statistics, most cryptos use massive amounts of energy, which has consequences on the environment.
For this reason, Ethereum gave up on the old paradigm and adopted a new consensus mechanism. But besides saving energy, the Merge also offers a valuable lesson, namely that change is not possible without taking risks. In order to create something better, one has to take a chance.
Risk and change go hand in hand
The Merge was vital in the context of cryptocurrencies that received criticism due to their massive energy use. For Ethereum developers, the risk was necessary to make the coin more stable and attract investors who may have otherwise avoided crypto in order to protect the environment. The software update came with an inherent risk, namely that a rollover could affect the Ethereum market. However, Ethereum Foundation managed to beat the risk by quadrupling prize money for vulnerabilities discovered within the network. The Merge had an impact on the eth price, and just like any other change, it created winners and losers.
For instance, miners may give up on Ethereum mining because of a decline in business and seek other PoW opportunities. Whether the change was successful depends on how you look at things. Clearly, there are two perspectives: some may not even be able to see that the Merge was necessary because they focus too much on the negative implications. However, the change was indeed successful and will enable Ethereum to thrive in the future. Moreover, it brings many opportunities to investors, motivating them to begin their journey in the crypto world. And it also makes a difference in Web3, the 3rd generation of web technologies advancement.
The long road to change
Ethereum’s update was planned ever since the coin was introduced, and Vitalik Buterin mentioned PoS as a preferred alternative. By the end of 2020, Beacon Chain was launched, introducing PoS to the ecosystem. Considering that the Merge occurred this year, one can clearly notice that it takes time to implement real change. And more often than not, the road is not even smooth, as happened within the Ethereum ecosystem.
Miners didn’t agree with this move because they knew their business would suffer. It wasn’t easy for developers to switch to PoS either, as they got used to the PoW model and could comfortably work with it. But other challenges kept appearing, and all of them could have hindered the Merge’s successful completion. It was a lengthy process, but with patience and hard work, it came to fruition, teaching an essential lesson: when you have a solid vision, nothing can really deter you from achieving your goals. But obviously, vision alone is not enough; you also need to develop a detailed plan that can give you direction and allow you to look at the bigger picture.
Transparency is what matters the most
During the entire process, the Ethereum Foundation showed honesty, letting miners and investors know how the Merge could impact them. They did it before the update happened and after it was completed. This level of transparency is crucial in enhancing the trust of regulators and users. By remaining candid until the end, Ethereum offered those involved in the platform the opportunity to feel like they were part of something bigger than themselves. Workers in different industries, such as manufacturers, can take Ethereum as an example and provide transparency – that way, they will make an impact on the world.
The main elements that drive change
Clearly, the Merge offers many valuable lessons to those who seek to reduce their carbon footprint and make a difference in the world and the economy. Vision, persistence, and planning are all necessary ingredients when working toward a significant change. But if risks hadn’t been taken, the Merge would have never happened, and Ethereum wouldn’t have moved one step closer to greener technology. Now more than ever, there’s a strong need to adopt eco-friendly practices in order to protect the planet. Modern technology has catastrophic consequences not only on the environment but also on global health, so innovation is imperative. And when it comes to crypto, there is always more room for change.
Undoubtedly, Ethereum will keep thriving, as the Merge had only been the first stage in its upgrade. As Vitalik Buterin said, “The Merge only represents 55% of Ethereum’s evolution; the surge, verge, purge, and splurge will follow. In fact, the Merge’s energy implications could be just the beginning of a greener crypto industry.” In the U.S., crypto electricity usage nearly equals that of residential lighting. Recently, the White House issued a report stating that the crypto industry should strive for a clean energy future, and Ethereum has already started this paradigm shift through its latest changes. By becoming more sustainable, the crypto industry could see even more outstanding results.