We already know what investors think about the Ethereum upgrade, dubbed “the merge”. It’s supposed to keep the Ethereum blockchain as the gold standard as it switches to proof-of-stake, allowing for ETH holders to collect yield for staking their coins (just think of it as a bond to make it easier) and – over time – lower fees so ETH isn’t just the blockchain for the crypto world’s one-percenters.
Martin Green, co-CIO of Cambrian Asset Management, likened the merge to Ethereum becoming like the cloud computing arm of Amazon
Over the last five years, developers have fled Ethereum because of its cost and general slowness. What are they thinking about the merge? And, will they come back to Ethereum, if they left it?
“As a project, we had to innovate and pivot our onchain staking mechanics to be built on Polygon
Cost-savings are not expected in the near-term.
Consensus among developers is that they are all looking forward to the upgraded Ethereum, saying it will help facilitate the growth of Web 3.0. But, there is concern that “the merge” is going to take a couple years before network congestion is improved through the sharding of the existing Ethereum network into multiple portions called “shards”. This will lower gas fees on the network.
Some savvy developers have learned to game the system – or, in true Wall Street fashion, have created new investable products to take advantage of the high fees associated with ETH.
Decentralized finance protocol StaFi, built using the Cosmos-SDK framework for blockchain applications, created a dencentralized app (DApp in crypto jargon) called rETH on Ethereum – these are liquid staking derivatives for the ETH2.0 stakers who agreed to keep and hold their tokens during the merge.
Today, the ETH tokens staked through the StaFi rETH app are valued at more than $40 million.
“During the development and operation of the rETH App, we found the Ethereum gas fee could be very high under some circumstances, like one transaction may cost over $100 or even $200 in gas fees,” says Liam Young, founder and CEO of StaFi. It’s one example of why developers turned to the once called Ethereum killers.
“Lots of developers and users left Ethereum and are using other public chains like Binance Smart Chain, Solana
Will they come back?
“Most of the alternative blockchains focus on solving scalability problems, so they provide high-speed network environments but they sacrificed network security and stability,” says Ben Kim, CEO of Superblock out of Singapore and South Korea. Superblock is designing and developing a new mainnet named Over network. Mainnets are a blockchain that has been fully tested, developed, deployed, and is running its own network with its own technology and protocol.
“I’ve used Ethereum for several years because it contains an enormous number of assets and has the most secure main network in the world,” Kim says. “But Ethereum’s fees are unstable. Service providers and users cannot guarantee stable usability because the fees are unpredictable. I think it is unlikely that the merge between ETH 2.0 with ETH 1 will be clean but it will be a significant upgrade. I hope it works.”
The first time Ethereum’s fee problem came to the fore was with the advent of CryptoKitties in 2017. As CryptoKitties became popular, the traffic on the Ethereum network exceeded network processing limits. Mainnets were launched to solve the scalability problem. The second time the Ethereum network got bogged down was during the DeFi craze in 2019-20. It became too cost prohibitive, and a new cadre of blockchains were launched to take away Ethereum’s market share.
“If Ethereum’s upgrade is successful, I can see a wider adoption and lesser demand for other alternatives,” says Silva from YetiTown. “For a long time, users have been demanding a better Ethereum. If Vitalik (Buterin, Ethereum co-founder) and his team can successfully pull this merge off, then I think it would solidify ETH’s use-case and Ethereum’s dominance in the cryptocurrencies space,” he says. “Looking at things from a network economics perspective, greater adoption and onboarding of users into the network will only make Ethereum that much more valuable.”
*The writer of this article owns Polkadot.
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