Ethereum holds a lot of promise for the future of cryptocurrency, but this year has been tough for the industry. Nearly $1 trillion in cryptocurrency value was wiped out of the market as a result of a devastating crash, depleting thousands of millions of dollars in savings.
A number of cryptocurrency trading companies have filed for bankruptcy in 2022.
There’s a potential saving grace in sight for the cryptocurrency industry: an upgrade to Ethereum, the most popular platform for crypto projects that provides the technological foundation. As a result of years of delays, some insiders have begun to wonder if the upgrade – known as the Merge – would actually be completed.
However, if everything proceeds according to plan, the Merge will happen around Sept 15, more than eight years after it was first discussed. As a result of this change, Ethereum would move to a more energy-efficient infrastructure, addressing the widespread criticism that crypto has a negative carbon footprint.
Additionally, it would pave the way for future upgrades to reduce fees associated with conducting transactions in Ether, the platform’s signature currency.
There are, however, profound risks involved. It’s an almost absurdly complex process, even by crypto standards.
Throughout the months leading up to the main event, insiders have been frantically discussing developments such as the Goerli Testnet Merge and the Beacon Chain’s Bellatrix upgrade.
Crypto applications that use Ethereum, which collectively manage $50 billion in user funds, would be imperiled if the Merge went awry.
Blockchains allow digital coins to be exchanged on public ledgers. Ethereum is one of the most prominent blockchains. The Ethereum chain conducts transactions in Ether.
One of the industry’s elder statesmen, Vitalik Buterin, founded the platform in 2013 as a teenager. He wanted to develop a more flexible crypto system than bitcoin that could execute instant financial contracts and other complex exchanges.
The design of Ethereum allows it to support a range of financial engineering applications. By using the software, developers can create applications that perform more complex tasks than simply transferring money.
It has now become the platform of choice for thousands of businesses and projects in the experimental world of decentralized finance. Several non-fungible tokens, called NFTs, are built on Ethereum.
The Merge is a fundamental change to the verification system that is at the core of the project.
The Merge will shift Ethereum to a less energy-intensive framework called “proof of stake.” With proof-of-stake, computers do not need to use as much energy to verify transactions.
In place of this, crypto investors deposit a certain number of digital coins into a shared pool that enters them into a lottery. The lottery is drawn every time an exchange happens to select a participant to verify the transaction.
By switching to this technology, Ethereum’s energy use will be reduced by over 99%, which crypto boosters hope will increase its popularity.