A major event that the crypto industry has been waiting for has finally happened: Ethereum’s “Merge”, which proponents say could increase crypto prices in the long run and significantly change the future of cryptocurrency.
The merger is an upgrade to the Ethereum blockchain, which powers innovations in the crypto ecosystem such as non-fungible tokens (NFTs).
There has been a boom in crypto investing in the past year, with the value of the overall market more than doubling at one point last year as people piled their money into bitcoin, ether, dogecoin and other cryptocurrencies. Whether you’re into crypto and follow every latest development in the space, or you own some crypto via a platform like Coinbase or Venmo, if you’ve heard about the so-called Merge, you might be wondering what it actually means for you .
Here’s everything you need to know about the Ethereum Merge, including what the upgrade means for crypto prices, the environment and more.
What is the Ethereum Merger?
This Ethereum upgrade or “Merge” as it is referred to has changed how new crypto transactions take place on the blockchain.
Previously, the Ethereum blockchain, like the Bitcoin blockchain, ran on a proof-of-work model, involving nodes – computers that are part of a large network – competing with each other to solve complex math problems. The successful ones can then mine the next block of a transaction and create new coins.
The upgrade switched Ethereum to the proof-of-stake model, which is a more energy-efficient and environmentally friendly system. This involves selecting nodes via an algorithm that has a preference for nodes that like a network’s currency more.
In other words, their “stake” in the network is rewarded above the computing power rewarded in the proof-of-work system.
When did the Ethereum merger happen?
After many delays, the merger finally took place in the early hours of September 15, according to a tweet from Ethereum co-founder Vitalik Buterin.
Why did the Ethereum merger happen?
Proponents say that the transition allows the Ethereum network to reduce its energy consumption by about 99%.
The proof-of-work model, which is what the Bitcoin network uses, requires much more energy than the proof-of-play model. The negative impact on the environment of crypto-transactions has been most important to many cryptocurrency critics and advocates, and Ethereum’s shift to the less energy-intensive proof-of-stake is considered a significant advance.
It will also lay the foundation for other aspects of the network’s roadmap, such as making transactions more efficient.
What does the Ethereum merger mean for you?
If you hold crypto assets, there is probably no action you need to take. But it could provide a more environmentally friendly option for those interested in crypto, and there could be some impact on crypto prices.
What does the Ethereum merger mean for your ether holdings?
If you hold ether — the native cryptocurrency of the Ethereum blockchain and the second most popular cryptocurrency after bitcoin — you don’t need to do anything, according to the Ethereum Foundation. But beware of scams. If an app, crypto exchange or crypto wallet sends you instructions or recommendations, you should make sure that the notifications are actually coming from those platforms, the Ethereum Foundation wrote in a blog post.
“If you’re a user and you just want to send some Eth from one person to another or use a DeFi app, it really doesn’t have any kind of material change for you,” said Chris McCann, a partner at Race Capital.
If you’re a socially conscious investor who feels uneasy about the environmental impact of crypto, this could be good news for you.
“There is a lot at stake for this new event,” Eliézer Ndinga, director of research at 21Shares, which provides cryptocurrency exchange-traded products, told Money in August ahead of the merger. He described the merger as “a big step forward, especially for the retail investors who are more aware of global warming and climate change” who want to invest in more environmentally friendly assets.
What does the Ethereum Merge mean for ether’s price?
Crypto prices have been through the wringer this year. After an impressive few years that included record high prices last November, cryptocurrencies such as bitcoin and ether have more recently seen significant declines along with other financial assets such as stocks. Bitcoin is down about 58% since the start of the year, and ether is down about 60%.
But this merger could shake up the price of ether, which has outperformed bitcoin during much of crypto’s recent recovery.
“ETH is outperforming bitcoin largely due to news of the upcoming merger,” Ben Weiss, CEO of cryptocurrency ATM company CoinFlip, told Money via email in August ahead of the merger. “If it goes smoothly, the merger will be an incredible technical feat.”
Fans of crypto — and specifically the Ethereum network — hope the move will help boost ether’s price. A successful merger “should put a strong bid under the price of ETH and help it resume its upward trend,” Alex Tapscott, managing director of Ninepoint Partners’ digital assets group, told Money via email ahead of the event .
Katie Talati, the director of research at investment firm Arca, told CoinDesk in August, “This is an event that a lot of people are undercounting, especially based on current price appreciation” of ether. “We’re going to look back at this a year from now and [realize] we were at the [market] down there.”
There is some perception that this change will unlock more growth potential in Ethereum, says Stéphane Ouellette, CEO and co-founder of FRNT Financial. But the long-term assessment of the value of the move “will likely be judged by the subsequent years of development on the blockchain and the applications and technologies that emerge,” he adds.
In other words, while the merger is likely a positive thing for Ethereum and its believers in general, investors may want to hold on instead of immediately taking advantage of a price jump. (This is what financial advisors actually recommend — invest for the long haul, rather than speculating and trying to get rich quick.)
The merger really lays the groundwork for other advances that hope to be made on the Ethereum network in the future, McCann says. Long-term, it could be a “positive catalyst” for ether, he adds.
What about bitcoin’s price?
While Ethereum is the star of the show when it comes to the merger, it isn’t necessarily the only crypto to benefit.
“A successful merger is likely to boost the price of all crypto assets,” especially ether and other projects associated with it, Tapscott said in August.
But bitcoin prices, he added, could also rise as “investors generally gain more confidence in the asset class.”
This story was updated after the Ethereum merger took place.
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While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
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