Ethereum's Merge Delayed: Does it Only Briefly Postpone Its Ascent to Become the Leading Cryptocurrency?

Right now, Ethereum is the second most popular digital currency, but its valuation has been relatively static behind Bitcoin’s. It’s like a ball on a string. It can go up and it can go down, but it is unable to go anywhere beyond the string’s limitations. New heights can only be a reality if one were to snip the string and allow Ethereum to ascend beyond its original, intended design. 

At the time of writing, Ethereum is enjoying a considerable boost from last week, so it’s no surprise that Ethereum is consistently garnering the level of attention from investors that it has been since its inception. 

On the other hand, its closest rival Bitcoin has seen little movement since last week, but comfortably remains the most popular coin with the largest market capitalization. The differences between first and second place are plain to see, but is Ethereum closer to the top than it looks?  

POS and POW

This is what Ethereum 2.0 has promised to achieve. If the old proof of work (POW) scheme was the string, then proof of stake (POS) is the knife to cut it in two. To explain this a little more, POS is due to completely change the infrastructure on which Ethereum is built. At the moment, POW utilises and updates the blockchain by allowing users to become miners. These miners essentially work to validate each block’s code, with the user who validates the hash earning themselves ETH while creating the next block in the blockchain. This concept has so far been relatively successful, but the problems it brings have done enough to hamper Ethereum’s growth. 

Proof of work consumes a huge amount of energy. There is also the concern of physical waste, due to the number of servers heading to landfills sooner than they otherwise would be because of how often and hard they are run. Mining is similarly becoming unstable due to weakened security and selfish miner attacks, where miners are hiding their blocks from the rest of the network in order to receive a higher pay-out. 

Proof of stake, however, has promised to change this. Designed to counteract the mired longevity of POW, this new strategy will instead turn miners into validators. After depositing a certain amount of ETH into the system, validators can then be chosen by an algorithm to validate the new block. This is then repeated by a number of other users until the block is validated and linked to a new one. This will mean that, instead of being dependent on energy, the mining of a new block will instead be decided on the number of coins a user has deposited. 

Under this new strategy, Ethereum promises to be far more energy-efficient, with less wastage, fewer security risks, and the odds stacked in the favour of the users. Only there’s a problem. Being such a revolutionary switch around for Ethereum, the process of merging the new systems together has taken a little while longer than first thought.

Ethereum’s Merge

Dubbed “the merge”, Ethereum describes the turnaround as a spaceship docking into a new system, with a better engine and a hardened shell. But as with any dramatic redesign, it takes time, testing, trialling, and a delicate strategy to merge the old with the new. Just after the announcement of the merge in 2021, Ethereum’s prices hit an annual high of $3,400, quadrupling its value from the start of that year. Users have been investing in Ethereum in the lead up to its merger, which proves the faith and anticipation have so far won over the uncertainty and potential risks of the change. 

The postponement has been seen by some to be a clinical moment in the merge, with users becoming more unsure of whether the POS strategy will actually take off. But this couldn’t be further from the truth. The fact is that, while Ethereum’s market capitalization is less than half of Bitcoins, the latter is still an investment without any true ability to be utilised for contracts in decentralised finance applications. What Ethereum 2.0 is heading for has every chance of creating a market flip, where the upgrade will push the network to a valuation which can compete with Bitcoin. 

While the delay has not helped things, the truth is that users have invested large amounts into Ethereum in preparation for the merge. They are also smart enough to realise that a switch up like this takes time, and a delay in its arrival only points toward the work going in to ensure its success. Ethereum will certainly be putting every ounce of its energy into the merge. For the sake of a few more months, it would be unwise to write the merge off as a failure in Ethereum’s efforts to top the cryptocurrency pool. After all, it must take heed of its surroundings and ensure everything is in place before the string is snipped and the sky becomes the limit.