Ethereum Takes Off amid Talk of an Imminent Merger

The main problem of Ethereum limiting the growth of network usage is its low bandwidth. The transition from the proof of work (pow) algorithm to proof of ownership (pos) is intended to correct the situation. Since a test network on pos has been developing for a long time in parallel with the current chain, the “move” to a new algorithm is called merge.

Ethereum was the first full-fledged blockchain with support for smart contracts, so until 2021 it was the absolute dominant in the NFT and DeFi markets. However, with the growth of network usage, the load increased and with it the fees, since the bandwidth does not exceed 20 transactions per second. Users are forced to pay miners “tips” so that their transaction gets into the block as soon as possible. During the days of sales of popular collections or during the hype in the DeFi market, the average commission exceeded $ 50.

The high cost of use has led to increased demand for competitive networks. Because of this, the share of Ethereum in the DeFi sector has decreased from 96% in January 2021 to the current 58%.

Ethereum needs faster and cheaper solutions to maintain its leadership among altcoins.

Vitalik Buterin made a choice in favor of pos, since the “environmental burden” is significantly reduced, and reliability in the long term is higher. The latter is achieved both due to the growth of decentralization (there is no need for powerful equipment), and due to the risk of loss of funds by attackers in an attack of 51% (when it is detected, the protocol destroys the ETH used).

The question was raised only by the timing of the merger, since the time of the actual move is constantly postponed. However, more and more specific dates have been called recently, and developer Tim Beiko proposed last Friday as a preliminary day on September 19. In a few days, Ethereum has gained 17% against Bitcoin.

The Lido token was also optimistic, which has almost doubled in recent days. The Lido platform represents staking in Ethereum 2.0 (a branch on pos) and currently provides about a third of all frozen assets ($6.3 billion out of $19.4 billion).

However, optimism may be premature: September 19 is a preliminary and non–binding date, and the dates of the move have been repeatedly postponed. Several major tests are planned for August, after which the development team can announce the final date. Ethereum fans should keep their finger on the pulse!