Ethereum bulls are still rejoicing after last week’s successful Ethereum Merge. The Ethereum network shifted from proof of work to proof of stake — a massive undertaking likened to changing a spaceship engine mid-flight.
It was a long time coming. The Merge was beset by delays for years. But the wait seems to have been worth it.
Now that we’re on the other side of it, it’s important for investors to understand the broader implications of the Merge. Because the Merge is not just a boon for Ethereum. It’s good for the entire crypto universe.
Massive Energy Savings
Ethereum’s new proof of stake system makes the network more sustainable. And “more sustainable” is an understatement. Moving away from energy-intensive mining to its new staking protocol should enable Ethereum to consume 99.9% less energy. That’s huge — especially since crypto has been criticized for its large carbon footprint.
Ethereum is the second-largest crypto by market cap. The fact that developers were able to successfully reduce its energy consumption by such a massive amount is a net positive for the crypto market as a whole. It shows that large cryptos can be agile and adapt to changing needs. And it paves the way for other crypto projects to adopt similarly sustainable approaches.
As climate change worsens, it’s vital that crypto finds a way to be sustainable. Ethereum proves that it’s possible.
A Growing User Base
Ethereum’s transition to proof of stake means that more members of the Ethereum network will be able to earn rewards for participating in and securing the network. Rather than relying on miners to validate transactions, ETH holders can stake a portion of their holdings in order to validate transactions and earn a share of transaction fees.
This incentivizes more ETH holders to become active participants in securing the network, which should in turn attract even more users to the network. Ethereum is making it easier for ETH investors to profit from the network. Just as startups use crowdfunding to find enthusiastic users-turned-investors, Ethereum is expanding the crypto ecosystem by opening it up to more participants. New crypto investors — some of whom may be learning about crypto through the news of the Merge — are entering the crypto space. And that growth is good news for the crypto market as a whole.
Institutional Interest
The Merge was a major software upgrade and an incredible feat of technology. It’s a testament to the ETH developers that they were able to make it happen. And now that Ethereum is in the news because of it, it’s piquing more investor interest. That includes institutional investors. Just this week, Nasdaq started offering institutional investors custody services for both bitcoin and Ethereum.
“We believe this next wave of the revolution is going to be driven by mass institutional adoption,” said Ira Auerbach, head of Nasdaq Digital Assets. “I can think of no better place to bring that trust and brand to the market than Nasdaq.”
Overall institutional investor sentiment has been warming to Ethereum, even before the Merge. And while many institutions are still waiting to dip their toes into Ethereum, it’s only a matter of time before they take the leap. Institutional investors need to diversify their crypto exposure, and now that they’re getting used to bitcoin, Ethereum is the natural next step.
A Bright Future
The Merge is a major milestone for the Ethereum community. Yes, there’s still more work to be done. But for Ethereum investors — and crypto investors in general — this is a win.
In the short to mid-term, the crypto bear market is likely to continue. Even coming off of the Merge’s success, Ethereum has been down over the past week. And the SEC is losing its mind over the Merge and suggesting it might make Ethereum a security. But the short-term price action and potential regulatory uncertainty don’t negate Ethereum’s larger potential. In the long term, things will improve.