The Merge Happened. Now What? 🤷♀️
We wrote an article about ETH Merge before it happened, so we felt like we should do a follow up on the same topic. We would highly suggest you go ahead and read that article prior to reading this one as you will have a better understanding of The Merge (ignore the clickbait title, doing it for the algo).
Now what?
The Merge upgrade did not address all issues that Ethereum blockchain is currently facing. According to Vitalik (founder of Ethereum) after The Merge, Ethereum is only 55% complete, meaning there are some other additional upgrades needed that address issues like speed of transaction validation, accuracy, gas fees and scalability. While we won’t get into the details of the next steps, there is this beautiful chart that shows those next steps.
After The Merge, it comes:
- The Surge — Ethereum network will be more scaleable
- The Verge — Will optimize storage and reduce node sizes, help scalability
- The Purge — reduce historical data to minimize network congestion
- The Splurge — address additional issues after all upgrades are done
According to Vitalik, after all those phases are done, we should expect that Ethereum Network will be able to process 100k transactions per second (for comparison, currently it processes 15 transactions per second). All those phases will take 3–5 years to get completed according to some estimates.
What about miners?
This definitely hurt miners as they are out of business now. When I say out of business, I am not referring to your cousin why might have had one Ethereum rig, I am referring to huge mining ‘farms’ who had hundreds of thousands of them. Like the picture below.
If you still think mining was not a big thing, few of those publicly trading mining companies had massive market cap:
- Marathon Digital Holdings (NASDAQ:MARA) — Market cap: US$1.4 billion
- Riot Blockchain (NASDAQ:RIOT) — Market cap: US$1.14 billion
- Canaan (NASDAQ:CAN) — Market cap: US$587 million.
All miners were pissed and they don’t really buy into the PoS hype. They argue that while Ethereum network is not concentrated in a few publicly trading mining syndicates, it just switches to different players now and it is not well distributed as everyone expects. In fact, if we deep dive into this, they are kind of right when they say that.
Over 60% of staked ETH currently is owned by four companies. Lido, a platform that offers liquidity for staked assets, controls over 30% of the stake on Ethereum’s PoS mechanism chain. Binance, Coinbase and Kraken which are the largest crypto exchanges — own more than 30% of the network’s stake.
Does that mean that environmentalist will be able to sleep longer?
It is the biggest upgrade and it is considered to be a game changer for cryptocurrency overall. One of the biggest goals achieved with this upgrade is the cut on energy consumption by more than 99%.
Overall cryptos, especially Ethereum and Bitcoin have been criticized for the process of mining new coins. Miners were spending a lot of energy to verify those transactions through proof of work, which is the reason why critics mainly argued about the energy consumption that happens from miners by using highly specialized computers who were trying to solve complex math problems in order to validate transactions.
The migration to PoS (Proof of Stake) requires way less energy than the previous framework (PoW). Computers will not be racing with each other to verify transactions (which in turn will require less energy). Instead, a crypto holder will deposit (read: stake) crypto in a shared pool. Every time an exchange happens, one of those holders who participated in that pool will be chosen randomly to verify the transaction and win the rewards afterwards.
To give you some perspective, after the upgrade to PoS, Ethereum network spends only 0.01 TW/year, while YouTube and Gold mining which spend more than 240 TW/year separately. (TW stands for Terawatt and equals to 1,000,000,000,000 watts).
Maybe environmentalist won’t sleep at after all. It is time to go after YouTube and Gold mining now.. 🤦♀️
Bruuuh…💆
Cheers!
