It appears that Ethereum’s giant upgrade is underway – at last.
After a long time, the convergence appears to be on track for September, with the blockchain’s encryption technology experiencing a drastic transformation to a framework in which the formation of Ethereum digital assets would become much less wasteful in terms of power consumption.
According to Omar Syed, founder of blockchain-based platform Shardeum, this could be seen as an amazing prospect for the Ethereum network. He believes there may be some controversy surrounding the integration, but he does not believe there would be complications.
Investors appear to concur, with Ether outperforming the industry leader, Bitcoin.
Ether is experiencing a purple patch and has increased for six weeks in a row, taking it from its one-and-a-half-year trough of $880 in June to thresholds nearing $2,000, despite being far from its November high point of $4,868.79.
In correlation, Bitcoin has recovered 37% from its June drop to $24,116.
Ethereum’s coin is eating away at Bitcoin’s share of the market as per CoinMarketCap: it now comprises nearly 20% of the overall virtual currency market cap of $1.14 trillion, up from under 14.9% just 60 days ago. Bitcoin’s market share has fallen to 40.2% from 44.9% during the same timeframe.
Cryptocurrency remains tightly coupled and is of the belief that if the merge is feasible, it should increase the value of Bitcoin, according to Alex Miller, chief executive officer of Hiro, which develops programmer tools for creating Bitcoin apps.
If the founders of Ethereum succeed, which is widely assumed, it may be a key differentiator for the blockchain, resulting in it being less expensive to mine tokens and simpler to implement for financial technology as well as other virtual currency applications.
Naturally, not much is sure regarding the mysterious change, which has been postponed numerous times, with programmers most recently canceling plans to start in June. This is frightening venture capitalists who started to doubt that it would never happen.
The merge is also risky, and the wealth of the approximately 122 million Ether in supply, worth approximately $232 billion, may be jeopardized if it falls through.
If the merger fails, the whole virtual currency universe would be set back five to 10 years, according to Hiro’s Miller.
The Ethereum network, as of now, validates blocks using the high-power consumption proof-of-work (PoW) technique, in which miners use large amounts of power to rapidly deal with complex mathematical problems to acquire freshly minted tokens.
On a separate string, Ethereum has now been trialing a proof-of-stake (PoS) framework in which miners only “stake” their tokens to verify transaction records and generate fresh blocks. The new framework claims to reduce the blockchain’s power usage by 99.95% while also preparing it for efficient processes.
Not all stakeholders are thrilled about the impending merger of the two frameworks, particularly miners of the ether token, whose costly mining rigs would be made useless and unable to be used to mine Bitcoin.
Historically, mining Ether has been more lucrative than mining BTC. As per Arcane Research, ETH miners could very well make $18 billion this year, in comparison to $17 billion for BTC miners.
A few miners have made the decision to mine the next most suitable alternative, such as Ravencoin or Ethereum Classic.
Some miners have stated their intention to fight back and keep mining Ethereum. This increases the possibility that a few individuals might very well keep the PoW system operating in its present state even following the merge, likely trying to directly compete with the improved blockchain.
That alternative, even so, has drawbacks.
To hinder the PoW concurrent chain after the merge, Ethereum creators devised a difficulty detonator that tremendously increases mining difficulty.
Furthermore, USDC and Tether, the two most prominent stablecoins, have backed the merge, lowering the probability of widespread adoption of the concurrent PoW chain.
The Bottom Line
According to Alex Thorn, Galaxy Digital’s director of firmwide data analysis, the probability of a lengthy Ethereum chain split again after the merge continues to remain slim.
Nevertheless, the derivatives positioning strategy suggests that a few stakeholders are getting ready for a tough split or a concurrent PoW chain.
According to Matthew Sigel, head of virtual currency research at fund manager VanEck, Ether futures have been trading at $1,905 on the CME open market, reflecting anticipations around a working proof fork.