Kosala Hemachandra is the founder and CEO of MEW (MyEtherWallet).
Whether you call it the Beacon Chain Merge, ETH2, or something else, this update to the blockchain – the move from the proof-of-work (PoW) to the proof-of-stake (PoS) consensus mechanism – has been a part of the roadmap since the inception of Ethereum (ETH). The excitement and focus should really be on the long-term impact this will have on projects, developers, and users of Ethereum. As we welcome PoS through the Ropsten testnet, I believe this will be a major leap forward in scaling Ethereum for mainstream adoption.
With non-fungible tokens (NFTs), decentralized autonomous organizations (DAOs), and staking becoming widely adopted, the Ethereum ecosystem will need to expand in a way that makes sense for the next ten, twenty, and fifty years of development. With the successful deployment of proof-of-stake, developers will continue building out these innovations using more environmentally conscious processes.
My long-term thoughts on the Beacon Chain
As someone who has lived and developed through all of Ethereum’s changes, I believe in the innovation, but do not see the Merge adversely affecting any existing functionality – unless you are a miner because you won’t make any ETH as a mining reward. However, I believe we’ll see validators take over the miners’ spots with zero issues and will pave the way for a more scalable network.
The idea of merging has always been on the outline of where we planned to go, and although it’s taken several years, experts needed the proper research and due diligence to create a fully decentralized PoS system. Moving away from proof-of-work is not a downside to the overall adoption of Ethereum – instead, proof-of-stake is a chance to enhance the overall experience for users.
From the user’s perspective, this Merge will not bring noticeable changes to their daily activities. In a way, it will reduce inflation because everyday users will no longer have to pay for both validators and miners, and only pay for validators.
How this impacts institutional interest
There have been worries around sustained institutional interest in Ethereum with the continuous delays of the beacon chain Merge, but now with a proposed date set for September, the institutional investors have something to track towards. Staking ETH remains appealing to institutions, and with the potential of higher yields, that interest will only grow post-Merge. As more and more investors look to find long-term growth opportunities in crypto, the Merge will help create a more exciting and ripe ecosystem for them to invest in.
From the institutional investment perspective, the Merge will create an opportunity to move assets onto Ethereum to take advantage of the new benefits that will come with the upgrade.
The beacon chain Merge is truly the first step towards a scalable Ethereum, and should be seen as a major milestone in building a more environmentally sound blockchain for the transition to Web3.
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