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The network’s switch to proof-of-stake has an impact on Ethereum as a “network state,” fees, and the environment. But it won’t make a huge difference
The network’s switch to proof-of-stake has an impact on Ethereum as a “network state,” fees, and the environment. But it won’t make a huge difference. A new era of creation is beginning with Ethereum, one that is supported by a solid infrastructure and driven by unrestricted creativity and innovation. Ethereum has a promising future because it is also affordable, quick, and private. Read to know more.
The Merge’s failure to lower Ethereum transaction fees is its most significant failure. It’s undoubtedly what many customers would have preferred, and the infrastructure enhancements achieved in the Merge may someday make lower costs possible. But it won’t take place right away. Ironically, since Tuesday, Ethereum costs have increased by over 25% to an average of over $3 per transaction, probably in part as a result of traders and holders reallocating for the Merge. However, as the day goes on, the prices are likely to increase much more.
That essentially means that layer 2 blockchains like Optimism and Polygon, which reduce user fees by “rolling up” batches of transactions to post to Ethereum, as well as alternative layer 1 blockchains like Solana and Near, will continue to have a significant role to play in the cryptocurrency world.
The Merge is anticipated to cut the network’s overall energy consumption by more than 99% by eliminating Ethereum’s computationally demanding proof-of-work mining. The ecological impact of proof-of-work mining has been a significant barrier to blockchain adoption generally for at least five years, and the change has at least two specific catalytic consequences for Ethereum.
First of all, some institutions or other investors that were hesitant or unwilling to participate in proof-of-work systems will now be free to stake Ethereum, as was argued in a recent Bank of America research. Given the bad market, that may not result in a sudden sea change, but it could have a significant positive impact on the next bull cycle in cryptocurrency.
Second, and perhaps more significantly, the switch to proof-of-stake completely changes the game for non-fungible tokens (NFT). Despite how absurd things were during the previous bull cycle, NFTs are among the most blatant examples of end-user product-market fit on Ethereum. However, a lot of consumers and artists seem to have a general dislike of blockchains linked to environmental issues. Although that’s not their only complaint, fixing it will be crucial for the long-term viability of digital art on Ethereum.
Financial watchdogs at the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department threw a bomb on the cryptocurrency community just three weeks before the anticipated date of the Merge by approving the Ethereum-based Tornado Cash mixer. Many developers and node operators thought they needed to protect themselves by unilaterally filtering transactions involving Tornado Cash even though there are still many unanswered questions.
Moments like this are made far more concerning by The Merge for several intricate reasons. According to the general consensus, the proof-of-stake-based settlement will give the largest Ethereum stakeholders—including extremely well-known companies like Jump Trading—more authority. These organizations would then be more vulnerable to pressure from organizations like OFAC, which might result in “base layer censorship,” or a system-wide refusal to accept transactions linked to organizations that have been sanctioned by governments.
Although Ethereum has much more sophisticated technological foundations than Bitcoin, it may be a better fit for the numerous complicated potentials of a network state. Bitcoin currently has many characteristics of a network state. If the Merge is successful, it could be viewed as a time of “national togetherness” for Etherians, enhancing the community more than any technological advancement. At the risk of overstating the situation, the Merge may serve as an essential manifestation of the Ethereum “nation’s” strength and togetherness. This may be crucial for some upcoming disputes involving base-layer censorship and the control of tokens with a clear utility.
With the Merge complete, Ethereum has begun a multi-phase scaling journey that might take up to six years, according to Vitalik Buterin. With proof-of-stake working well on Ethereum, developers are now concentrating on creating a scalability method known as sharding. This will be done in “the Surge,” which will also support roll-ups and enhance layer 2 scalability.
After that, the Verge will launch a vector-based commitment system to replace Ethereum’s current Merkle tree architecture. This will drastically cut down on proof sizes and speed up verification, which will be a huge step forward for layer 1 transactions.
Up until recently, users were stuck because Ethereum was unable to carry out the computation required to secure user privacy on-chain. But now that the Merge has been completed, along with the Surge and Verge that followed, Ethereum ushers in a new era of invention that is supported by a strong infrastructure and driven by unrestricted creativity and innovation. Ethereum has a promising future because it is also affordable, quick, and private.