The Merge


This post is by Fred Wilson from AVC


In about a month, an important moment will happen in the world of crypto/web3. The Ethereum blockchain will move from a proof of work consensus mechanism to a proof of stake consensus mechanism. This event is known as “The Merge” in Ethereum land.

There are many reasons why this is an important moment for the world of crypto/web3, but to my mind the most important reasons are:

1/ The Merge reduces the carbon footprint of the Ethereum blockchain very significantly. No longer will miners be required to run large energy-intensive compute facilities to secure the Ethereum blockchain. There are many people out there who have serious concerns about web3 over environmental reasons. We can argue about that and have, but The Merge takes the concern off the table for the largest and most used smart contract blockchain. This is a big deal.

2/ The supply/demand balance of the Ethereum token will change dramatically. In a proof of work system, miners spend significant sums of money to run large energy-intensive compute facilities to secure the chain. They are rewarded with tokens (in Ethereum’s case, these are Ethereum tokens) and they must sell most of these tokens to pay their electric bills and hardware costs. In a proof of stake system, validators stake significant amounts of the base token (in Ethereum’s case, these are Ethereum tokens) and risk losing them if a bad transaction is validated. There is very little cost associated with staking so the tokens that are earned from staking (Read more...)