Tag along as we round up some of these important post-merge updates and see how they influenced the crypto market:
Last week saw the completion of the much-anticipated Ethereum merge. The momentous event signaled the network’s transition to the proof-of-stake consensus mechanism after being delayed for months. The transition, considered by many as one of the most significant events in the cryptosphere, also had plenty of ripple effects on the digital asset industry.
So, tag along as we round up some of these important post-merge updates and see how they influenced the crypto market.
ETH crashes along with the rest of the crypto market
The Merge was largely successful, with only a single missed block and consistent block times. However, Ethereum’s post-merge price action does not reflect the positive sentiment. ETH spiked briefly after The Merge, only to promptly retrace its steps and sink to the $1,500 mark by the end of the day (September 15). Over the next few days, ETH continued to register price drops, ultimately shedding over 20 percent of its value in the last seven days, and currently trading at $1,358.
There could be multiple reasons for the drop. Firstly, SEC Chair Gary Gensler recently stated that Ethereum’s switch to staking could label ETH as a security. This means lawmakers could regulate it as one, signaling FUD among investors. The second reason behind Ethereum’s price slump could be the potential bump in interest rates. The Fed is expected to implement an increase of 75 basis points to combat rising inflation.
ConsenSys, a blockchain software company, released a report commissioned by the Crypto Carbon Ratings Institute (CCRI), which claims that The Merge reduced Ethereum’s energy consumption and carbon dioxide emission by 99 percent. According to Vitalik Buterin, the switch to PoS is also expected to lower global power consumption by 0.2 percent. As such, the transition is being described as the “biggest decarbonisation in the history of tech”.
However, drawing such a conclusion seems a bit construed as the mining rigs that once powered Ethereum are now being used on alternative PoW blockchains.
Dogecoin becomes the second-largest proof-of-work (PoW) blockchain
This is another surprising update. With Ethereum no longer employing the proof-of-work protocol, Dogecoin has quickly become the second largest PoW blockchain, behind none other than Bitcoin. If this were any other coin, it wouldn’t be much to write home about. However, considering Dogecoin was created as a joke, its rise to the number 2 spot of PoW blockchains is a real eyebrow raiser.
Other PoW blockchains see a surge in hashing power
Since the PoS system does not need miners, several mining entities have started using their rigs for other blockchains. Ethereum Classic (ETC), an older hard fork of Ethereum, saw a massive jump in its hash rate post the Merge.
Hash rate measures the total computational power available for mining and transaction processing. After The Merge, ETC saw a 5X increase in its hashrate, going from 59.38 tera hashes per second (TH/s) to 310 TH/s on September 15, which is the day the Merge went live.
Other PoW blockchains such as Ravencoin and Ergo also saw a surge in their hash rates. This indicates that plenty of ETH miners are moving to other chains. However, profitability could take a massive hit as most of these PoW blockchains have been down double digits over the last few days.
Ravencoin is trading at $0.04182, which is 37 percent lower over the previous seven days. On the other hand, Ergo is trading at $3.16, which is 29 percent lower than the same time last week. Ethereum Classic is also down by 22 percent in the previous seven days, currently trading at $29.51.
Terrible start to the attempted PoW hard fork
The Merge also led to the creation of ETHPoW, an Ethereum hard fork that aims to preserve the proof-of-work system and protect miners from the loss of a revenue stream. When it was announced, ETHPoW faced much criticism from the crypto community. Ethereum’s co-founder, Vitalik Buterin even wrote it off as means to make a “quick buck.”
However, the project’s native cryptocurrency ETHW saw a 70 percent spike following The Merge. It jumped from $35.22 to $60.96 in the 5 hours following the Merge. This painted a bright picture for the future of the PoW hard fork.
But these gains were not long-lasting, as technical issues, a replay attack and pressure from lawmakers caused ETHW to plummet. At the time of writing, ETHW was trading around the $6.60 mark. That’s a 95 percent drop from its all-time high of $141 in August.
An event of this magnitude was bound to have some immediate reactions. However, it’s still early days in the post-merge era, and we should wait until the dust settles to see a clearer picture. Also, if Vitalik Buterin is to be believed, The Merge is just the first step to several other upgrades that will help Ethereum reach its peak performance.
First Published: IST