Ether Merger Approaches and Could Usurp Bitcoin

The World’s Number 2 cryptocurrency is weeks away from the merger, a transformative June upgrade of its blockchain Ethereum to make it faster, cheaper and less power hungry, holding out the prospect of a meaner and cleaner crypto future.

Even while bitcoin was hampered by inflation and monetary tightening, ether was buoyed by expectation this year. However, the merger — which would see ether mining move away from the energy-intensive proof-of-work approach and toward proof-of-stake – has been postponed, disappointing investors.

Brendan Playford, creator and CEO of decentralised financial data platform Masa Finance, said, “The timescale for seeing this debut continues to expand.”

“It’s very possible that Ethereum’s much-anticipated switch to a proof-of-stake system may be postponed once more, considering how hard the change is and how unclear it is that it can actually deliver on its promise of cheaper transaction fees and faster transaction speeds.”

On April 11, Ether slid 8% from $3 215 to $2 947, the day Ethereum lead developer Tim Beiko announced on Twitter that the June release had been postponed while testing proceeded. It is currently trading at $2 844, down 13% this month.

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“It won’t be June,” Beiko tweeted, “but probably a few months later.” “We don’t have a clear date yet, but we’re definitely nearing the end.”

The exact date of the merge, in which Ethereum’s EH1 chain will join with a new chain to become ETH2, is unknown, although many cryptocurrency experts believe it to happen this year. Beiko has not responded to requests for comment on Twitter or LinkedIn.

The fusion and the reversal

Ether’s market capitalisation of $363 billion is less than half bitcoin’s BTC=BTSP, and together the two make up 60% of the crypto market.

Yet bitcoin remains just an investment without any real ability to be used for contracts in decentralised finance applications. For this reason, many investors believe a flipping of the market is inevitable – dubbed “the flippening” in crypto circles – with the merge acting as a catalyst for Ethereum becoming the dominant platform.

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“We are seeing funds rotate into Ethereum in preparation for the merge, even though we don’t know when it’s going to be,” said Noelle Acheson, head of market insights at Genesis Trading. The buying interest, she said, did “hint that more funds seem to be appreciating that (Ethereum) is perhaps undervalued at this stage”.

Both bitcoin and ether are mined, or produced, using a proof-of-work (POW) method, where thousands of miners, or network nodes, compete to solve complex mathematical puzzles.

This is a massively power-thirsty process that’s estimated to cause more pollution than a small country every year, fostering fears about crypto in a low-carbon world.

The alternate proof-of-stake (POS) method uses much less power because, rather than have millions of computers race to process puzzles, it allows nodes that stake the most coins to validate transactions.

Ethereum has long been hobbled by issues of speed and processing costs. It only processes 30 transactions per second as a proof-of-work blockchain, but expects to process as many as 100 000 transactions per second once it moves to POS.

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That will allow it to compete with other, smaller altcoins such as Solana and Cardano, which use POS partly or entirely, for decentralised finance applications such as trading, investing, borrowing and even non-fungible tokens.

That’s provided Ethereum gets its upgrade.

“Ethereum maxis, people who believe in ‘the flippening’, believe it will come very soon,” said Acheson at Genesis Trading. “But it is only a theory and it remains to be seen.”

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