We won’t know right away whether the merger—the moment when Ethereum’s main network connects to a layer that uses a new consensus mechanism—lives up to its transformative promises. Some of the scaling efficiency improvements fans are excited about will only come after Surge, Verge, Purge, and Splurge — other upgrades promised by Ethereum CEO Vitalik Buterin. may continue in 2023. Buterin said in July that he considered Ethereum to be only 55% “complete” after the merger.
Meanwhile, a lot could happen. The price of Ether, Ethereum’s cryptocurrency, could move up or down after the initial volatility of speculation, and other proof-of-stake coins like Solana and Polkadot could also suffer. The change could also put Ethereum in a more gray area of regulation. Some legal scholars have suggested that the use of proof of stake puts cryptocurrency at greater risk of being classified as an unregistered security because the fact that validators work together with each other to approve transactions with an expectation of reward can be seen as a “joint enterprise”; other experts doubt that this argument is strong enough for the SEC. Buterin claimed that Merge makes the Ethereum network more secure, but some experts have suggested the opposite, warning users to watch out for “repeated attacks” where fraudsters can record a transaction on an old Ethereum chain and repeat it without permission on a new one.
As transactions on the post-merger network should look more like other financial transactions, traditional businesses that may have shied away from unique, energy-sucking cryptography processes may take another look at Ethereum — and proof-of-stake cryptocurrencies in general. If they do, the crypto industry could see its reputation and user base change.
On the other side of the coin, startups built around miners who were shut out of the Ethereum process will likely need to refocus or refocus on Bitcoin and other proof-of-work networks. Some die-hard supporters of Ethereum 1 plan to stick with Proof-of-Work Ethereum. One popular miner said he would “hardfork” the network, forking the code to maintain a separate chain (as some did in 2016 to preserve the previous incarnation of Ethereum). This move is unlikely to have much of an impact on the ecosystem unless major platforms recognize it; OpenSea, the largest platform for NFTs, has announced that it will only support proof-of-stake Ethereum.
Regardless of what happens next, Ethereum’s long-awaited move to proof of stake has injected new enthusiasm and technical capability into an industry battered by constant reports of fraud and legal investigations, plummeting token prices, and public exhaustion from celebrity endorsements and hype cycles. The fact that one of the major crypto players has invested time and money laying the groundwork for a less disruptive and more efficient ecosystem is a huge achievement. This signal alone could prove transformative for the Web3 industry, which is still receiving steady VC investment and could find new fuel to boost public perception.
Rebecca Ackerman is a writer, designer and artist from San Francisco. She wrote about the promise of crypto and Web3 for MIT Technology Review’s Money issue earlier this year.