The Ethereum Merge isn’t the solution the crypto world needs

It’s finally here: the “most significant upgrade in the history of Ethereum,” according to the Ethereum Foundation.

And they’re not alone in highlighting the importance of the upcoming Ethereum Merge, which will shift the chain to a proof-of-stake (PoS) consensus mechanism. According to The New York Times, it’s “one of the most eagerly anticipated events in crypto’s history”. Even Google has joined in the excitement, building a Merge countdown into its search engine.

But why is the Merge so significant? On the one hand, it’s been a long time coming. The prospect of moving Ethereum to PoS was first raised in 2014, and the upgrade was initially slated for 2016. After repeated delays, some critics argued it would never happen. Now the date is finally here, and expectations are understandably high.

There is a widespread belief that the Merge will transform the crypto world and accelerate mainstream adoption. But is the Merge the game-changing moment that many are hoping for?

Tackling Ethereum’s climate impact

The influence of Ethereum cannot be overstated. Its incorporation of smart contracts marked the next significant evolution of the crypto space following Bitcoin’s launch in 2009. Without Ethereum, we would not have NFTs, DeFi, DAOs, or the vision of a decentralised metaverse.

But Ethereum has not been without its detractors. While Bitcoin has long been criticised for its excessive energy consumption, the 2021 NFT boom brought similar scrutiny to Ethereum. And as concerns about the climate crisis grew, this became the focal point for significant backlash:

  • Mainstream outlets began to target the environmental impact of NFTs, from tech-focused sites like Wired and The Verge to respected news sources, including the New York Times and The Guardian.
  • The climate-focused backlash against NFTs forced some companies to change plans, including the social platform Discord. Even the World Wildlife Fund fell afoul of the issue.
  • Government regulators have focused on crypto’s carbon footprint, with the US continuing to highlight the energy consumption of proof-of-work systems as a key justification for intervention.

At the heart of the enthusiasm over the Merge is the expectation that it will solve this major barrier to crypto’s wider acceptance. By adopting a PoS consensus mechanism, Ethereum’s energy consumption will reduce by 99.95%, according to the Ethereum Foundation’s estimates. Understandably, this has formed the focus of most mainstream interest in the Merge.

No doubt, the Merge will offer Ethereum a major boost. By answering these widespread critiques, the blockchain will be on a more stable footing – at least regarding its energy usage.

But there remain several significant issues that the Merge will not solve. Far from being a panacea for all Ethereum’s limitations, it leaves many challenges unsolved.

Ethereum’s ongoing issues 

While Ethereum’s sustainability issues have been the focus of mainstream criticisms, the chain faces several other problems, all of which have been exacerbated by the massive growth in users over the past two years.

  • Scalability. Ethereum’s throughput – the number of transactions it can process per second – is limited by design. Currently, Ethereum can process around 15 transactions per second. This significantly restricts its usefulness for application building, real-time data processing, and other advanced use cases.
  • Cost. Ethereum manages its limited throughput by asking users to pay “gas fees” to incentivise miners to validate their transactions. At times of high demand, gas fees spike – sometimes to the point that the fees exceed the actual value of the transaction itself. And if your transaction fails, you’re still charged the fees. This will continue to discourage new and less-experienced users.
  • Interoperability. Ethereum cannot communicate with other blockchains simply or directly. This means that transferring assets to other chains relies on externally designed mechanisms (such as Layer-2 chains or inter-chain bridges) to provide ad hoc solutions.

Despite some initial reports to the contrary, none of these challenges will be solved by the Merge. Ethereum themselves stressed that both transaction speeds and gas fees would likely be unaffected. Instead, they are focused on future developments – such as “sharding” – that will potentially improve these issues, though it is difficult to say when they will be implemented.

As a result, the Merge is not solving some of the core barriers to crypto’s mainstream adoption. If Ethereum continues to be slow, expensive, and heavily siloed, the promise of a fully decentralised and interoperable future for the web will have to wait.

Or will it?

How Cudos is building the future of Web3

Since its mainnet launch in June, the Cudos network has been offering a scalable, efficient, and interoperable alternative to Ethereum. With significantly higher throughput and lower gas fees, Cudos is the ideal choice for developers of DApps and DeFi platforms.

Cudos is also a highly interoperable network, designed from the ground up to maximise connections with other chains. As part of the Cosmos ecosystem, Cudos supports the Inter-Blockchain Computation (IBC) protocol, enabling simple and efficient asset transfers to and from other Cosmos chains and enabling developers to build cross-chain applications.

But this is just the first step. We are committed to a long-term vision for a decentralised web, and this means thinking beyond the immediate issues and building for the future. That’s why we’re developing a revolutionary decentralised cloud computing platform to power Web3.

The soon-to-launch Cudo Compute will provide scalable and sustainable computing for the metaverse’s immersive virtual worlds. By allowing users across the globe to share their spare computing power, Cudo Compute will help to create a sustainable and connected world where no computing is wasted.

Support our vision of a sustainable and connected world

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About Cudos

Cudos is powering the metaverse bringing together DeFi, NFTs, and gaming experiences to realise the vision of a decentralised Web3, enabling all users to benefit from the growth of the network. We’re an interoperable, open platform launchpad that will provide the infrastructure required to meet the 1000x higher computing needs for the creation of fully immersive, gamified digital realities. Cudos is a Layer 1 blockchain and Layer 2 community-governed compute network, designed to ensure decentralised, permissionless access to high-performance computing at scale. Our native utility token CUDOS is the lifeblood of our network and offers an attractive annual yield and liquidity for stakers and holders.

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