MINING

What Does It Mean for Crypto?

  • Ethereum’s long-awaited Merge has finally arrived.
  • The Merge will take ethereum from proof-of-work to proof-of-stake verifications.
  • Insider asked 15 crypto founders and CEOs how the Merge will impact the broader crypto ecosystem

According to Vitalik Buterin, Ethereum’s Merge is finally here.

The Merge will transition Ethereum’s blockchain from a proof-of-work (PoW) verification system for adding new blocks to a proof-of-stake (PoS) system. The most immediate consequence of this transition is that Ethereum rewards, paid out in its cryptocurrency ether, will no longer go to miners — instead, Ethereum will reward stakers who verify transactions on the blockchain. 

Switching to PoS will greatly lower Ethereum’s environmental costs — supposedly by 99% — thus ridding the blockchain network of one of its biggest criticisms. But some critics say that the Merge will lower Ethereum’s network security, and that moving to proof-of-stake goes against the philosophy of many cryptocurrencies. 

Both cryptocurrency enthusiasts and investors alike are wondering how the Merge will impact the price of ether. Ether, much like the rest of the broader crypto market, has contracted a great deal from its high of $4,770 in November of last year. After Ethereum developer Tim Beiko announced the Merge back in July of this year, ether has had bursts of bullishness — rising from roughly $1,100 to a high of nearly $2,000 in August — followed by corrections. At the time of writing, the price of ether is about $1,580.

In order to gauge how the Merge will impact the future of crypto, Insider asked 15 crypto experts, ranging from CEOs of companies like Binance to long-term blockchain advocates like Dr. Adam Back, for their thoughts on the Merge. While some of the experts were bullish on the Merge, others view this as a step away from the ethos of crypto — but all of them agree that the Merge will bring big changes to the crypto ecosystem.

What the Ethereum Merge means for crypto

He Yi, co-founder of Binance and head of Binance Labs

Infrastructure remains a bottleneck in the crypto industry. The Ethereum Merge is a bold effort to lay the groundwork for Web3’s scalability and sustainability.  It also provides the security needed to reach mass adoption. While there is still a lot of work to deliver greater scale, the Merge will allow Ethereum to make significant progress by transitioning to a proof-of-stake consensus mechanism. This is a great foundation for developers to build on. The future is built through constant efforts to iterate and evolve.

 

Anatoly Yakovenko, co-founder of Solana Labs

The Merge doesn’t address scalability at all. It’s not gonna make the chain any cheaper, faster, but it’s awesome that they’re moving towards proof-of-stake because I think proof-of-work is taking way more energy just to provide security for the chain than anybody ever needs. It [proof-of-work] is just so energy intensive that, I think as an engineer it hurts me, hurts my soul to see it run. I think they’re not environmentally sustainable in any way. So I’m really excited about that aspect. 

I think what’s really important about the Merge is that it’ll kind of kill these conversations that proof-of-stake is any less secure. There’s still a lot of talk about that. 

When I talk to folks about NFTs, and things like that, I still have to spend 30 minutes explaining to them that there’s a difference between proof-of-work and proof-of-stake, and that the NFTs on solana are green. All those conversations will finally be put to rest. 

So I’m excited for the space overall — we’ll basically have all, except for one chain [Bitcoin], blockchains that are proof-of-stake based.

 

Dr. Adam Back, co-founder and CEO of Blockstream

I think that if you look at gold as a historic example, and consider why people chose gold as a money, it’s basically because it was scarce, durable, et cetera. For it to be scarce, it would inherently have an unavoidable production cost. It would take actual work to get it off the ground. So if you think about it from that point of view, gold is a proof-of-work system. The only way to get more gold is to go dig it up and refine it. So you say that with Bitcoin, so, you know, proof-of-stake is like: well, we don’t like doing work, how about our buddies and us get together and issue tokens, pre-mine a bunch of them, and we adjust the system.

So it is really more like a private company or something that issues shares. To me, that’s quite implausible to be considered as a basis for a global currency or hard money. It’s actually just replicating a company organized by stock, but without the government and accounting and transparency obligations of a company. So you get the worst of the worst of it.

So you get the kind of moral hazard money printing phenomena, but with no oversight, and no professionalism involved.

 

Avery Akkineni, president of Vayner3

The Merge will be the evolution of Ethereum that we have all been anticipating. We are excited to witness this transformation: further decentralization, increased stability, and, most importantly, a reduced burden on power consumption and mother nature will most certainly expand the opportunity for organizations to consider Web3 programs strategically.  

The Merge will help overcome one of our biggest challenges in the old system. The PoS protocol that ETH 2.0 uses allows it to be infinitely more eco-friendly and drastically reduces Web3’s carbon footprint now and in the future.

 

Yat Siu, co-founder and executive chairman of Animoca Brands

The Merge is a win for crypto, a win for decentralization and all that web3 stands for. It may feel that there is not much we can agree on in society, but the successful Merge proves that we can come together, build consensus and trust to execute something great. This went smoother than Y2K (showing my age).

 

John Wu, president of Ava Labs

As an operator in this space, I am rooting for the Merge, as the success of the event will create more awareness and adoption for blockchain technology. In a multi-chain future, this helps all Layer-1s, growing this space together.

 

Will Szamosszegi, founder & CEO of Sazmining

Ethereum is already dangerously centralized: as of August, over 57% of ether was staked by only four sources. The switch to PoS will only bolster this trend. Without decentralization, the protocol will always be vulnerable to attack or unwanted changes.

 

Nikos Andriogiannopolous, CEO of Metrika

This third upgrade will give the Ethereum community a quicker, more efficient, and reliable blockchain that will help to onboard the next billion users to Web3.

Much like we saw in the telecommunications space, advanced analytics will be needed to provide visibility into the underlying health of the Ethereum network and its performance to encourage this mass adoption.

 

Greg Beard, CEO of Stronghold Digital Mining

The Ethereum Merge is a meaningful experiment for blockchain and a noble approach to reducing the industry’s energy consumption. However, the Merge will effectively move the system away from decentralization, making a significant security sacrifice. The ETH blockchain will fork, with some miners continuing to work on PoW, while others will operate on PoS. 

The decentralized nature of Bitcoin is what provides the network security that investors and users require, so it’s unlikely that Bitcoin will follow suit. However, the industry continues to make strides in improving energy efficiency and working with cleaner energy, as regulators continue to pressure the industry at large.

 

Marshall Hayner, CEO of Metal Pay

It is always a benefit to the industry when a major player such as Ethereum takes action to become more sustainable, scalable, and interoperable. However, the Merge still doesn’t solve the issue of blockchain silos and the existing solutions for bringing them together are clunky and vulnerable to hacking. Beyond the Merge, we need intra-blockchain communications that bring popular proof of work cryptocurrencies like BTC, ETH and DOGE onto a proof-of-stake consensus so they can interact seamlessly and accelerate transactions and market adoption.

 

Jason Lau, CEO of OkCoin

Given that the broader crypto markets are stuck in headwinds with a momentary lack of catalyzing factors, the Merge has become the industry’s focal point. While it’s a drastic change for ETH miners and some developers have waited years for this, in reality the Merge doesn’t have any practical benefits for the average end users. Potential price swings notwithstanding, retail users aren’t going to notice any post-Merge differences.

 

Kosala Hemachandra, founder and CEO of MyEtherWallet

​​The current upgrade in simple terms is eliminating miners and letting validators prove their blocks. Although the Merge will not add any extra features to the Ethereum chain or cause any significant differences for users, I believe within the next couple of years we will see Ethereum implementing various new features and solving issues such as scalability. This will definitely bring more developers and users to the Ethereum ecosystem.

 

Andy Bromberg, co-founder of Coinlist and CEO of Eco

The Merge is a massive change for the space, creating the largest proof-of-stake blockchain and impacting how products are built on top of the largest smart contract platform. How that change is received will likely dictate much of the next few years of on-chain innovation.

 

Stani Kulechov, founder and CEO of AAVE

I’ve been waiting for this for years, so I’m quite excited about the event and it’s definitely a big transition. There’s sort of value at stake at the moment, and what’s fascinating for me as well is that actually now you reduce the need of the Ethereum network focusing on mining with electricity and effectively using capital as a way to confirm and validate transactions. 

This means not only that you will see accessibility — now you don’t have to have specific hardware to be able to validate transactions, you can actually join a particular pool or start validating yourself, so it democratizes it [Ethereum rewards] a bit more. The accessibility to validate Ethereum transactions I think that’s very valuable. At the same time, it also means that a lot of that Ethereum that is sitting on protocols like AAVE might be borrowed out to effectively support that Ethereum staking. 

I think it’s amazing for the DeFi ecosystem because effectively Ethereum is cheaper at the DeFi protocols and it gets borrowed out from there.

So you can stake ETH at the same time as using it as a collateral in the AAVE protocol and unlock liquidity.

 

Kirill Gertman, co-founder & CEO of Conduit

Despite having no strict hierarchy overseeing its development, Ethereum was able to transition to a new system seamlessly, reducing the global consumption of electricity by 0.2% overnight. This huge achievement is testament to the flexibility and power of decentralization.


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Traciwininger
Author: Traciwininger

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