The Merge for Ethereum is 2022’s second biggest crypto event

The biggest event in crypto this year was the market crash in May. Tonight, when (and if) the Ethereum blockchain succeeds in swinging to proof-of-stake, it will easily be the second.

Why it’s important: Beyond the supposed climate implications, The Merge showed that a giant, dispersed and leaderless society could reach consensus and carry out a complex reconstruction of a huge, decentralized network.

Status: We broke down The Merge earlier, but the big picture is a switch in the blockchain’s security model. You have this large distributed network, and every few seconds everyone has to agree that – no matter how things moved – everything has moved fairly.

• Right, so this new security model will require a lot less power, and that’s fine. But what did it take to get here?
• Firstly, this has been under consideration for a very long time. We thought the exchange might be “soon” back when Ethereum was three years old, in 2018.

While Ethereum was being tested and retested and debated making the change, many other crypto networks went ahead and launched with proof-of-stake from the start. Networks like Solana, Avalanche and Tezos.

• While it might seem like they were ending, they actually served more as test networks that Ethereum could watch and learn from.
• All of these networks are now worth millions, but still nowhere near as much as the chain they all imitate.

What it took: Getting to The Merge wasn’t as simple as writing and testing the code.

• It took updates. Many decentralized node operators actually had to update their code – none of these people are Ethereum employees. That’s not how Ethereum works. If all these independent network users worldwide had not upgraded their software to the latest version, The Merge would not work.
• It took education. Society had to buy in that this makes sense. This required a lot of podcasts, writing, conferences, Twitter threads and face-to-face meetings for influential people in the Ethereum world to take it upon themselves to argue for a new version.
• It required sacrifices. Millions—perhaps billions—of dollars worth of GPUs are on the way mostly useless as the data farms that have been running the proof-of-work system for Ethereum are winding down.

• It took risks. Can something go wrong? Oh yes. Having said that, to say that they have tested and retested transition is a wild understatement.

If the community hadn’t bought in and the code hadn’t been updated, everyone would continue to run on Ethereum Proof-of-Work when disgruntled miners fire it up after The Merge.

• But that’s not going to happen, because people are buying in. The consensus of users is what creates a cryptocurrency.

With the numbers: As all markets crashed yesterday, Ether’s value was compared to bitcoin rose (even though ether also fell, hard), suggesting that the market knows something special is happening with Ethereum.

💭 Our thought bubble: This is a moment to consider the funny way the story works. In 20 years, if cryptocurrency really does to financial markets what the web did to publishing, this year’s market crash will be an afterthought, and 2022 will probably simply be remembered as the year of The Merge.

• But right here, right now, with as many people losing as much money as they did in May, the beginning of the bear market is still the biggest news of the year.