Author: Derrick Cui, Graphics: Bella Aharonian
The BRB Bottomline:
Ethereum’s Merge is late at best and irrelevant at worst. The blockchain space is rapidly changing, and Ethereum is not keeping pace.
Businesspeople, as they do, compare blockchains by measuring conventional metrics used in traditional finance like trading volume, market cap, market share, and user uptake. And by these metrics, Ethereum is the king of cryptocurrency — currently, it boasts a market cap of $164.45 billion and had 105.58 million transactions in just Q1 of 2022. Ethereum holds a sizable lead over its competitors, especially after the Merge changed its consensus mechanism from proof of work to proof of stake.
But these metrics have nothing to do with the intended use case of Ethereum: a decentralized codebase. Ethereum was the first chain that permitted code to be stored on new transactions, allowing users to put “smart contracts” onto the chain. These decentralized contracts are pieces of code that are executable by all and can be open source.
So what was the purpose of the Merge? Essentially, it removed the need for computers to spend computational power to validate transactions, cutting down the energy required to operate by 99.9%. The Merge did not add any new functionality, but simply deprecated Ethereum’s application of proof of work — an long-obsolete consensus mechanism. It did not increase transaction speeds and did not decrease gas fees. The main achievement of the Merge was showing that it was possible to synchronously update a blockchain without taking it offline.
Time is Money
My main problem with the Merge is how long it has taken. People have talked about the Merge for eight years, and during this time, new blockchains have popped up with new functionalities — many of which already have proof of stake implemented. These new chains provide both more generalized and more specific services that allow for code to be added onto the chains. And they all outperform Ethereum by a mile.
|Transactions Per Second (TPS)||30 approx. TPS||250 approx.|
|Smart Contracts||Yes (EVM)||Yes (KEVM)||Parachains|
(JS, CosmWasm, EVM)
(C-Chain EVM based)
|Scalability||No||No||Parachains||Yes (Horizontal PoH)||Unlimited zones (Horizontal and vertical)||Yes (Unlimited subnets, shards like)|
|Gas Fee||$1- $15|
(Based on network’s traffic)
|Near to zero||Near to zero||Near to zero||Near to zero||Near to zero|
|Deposit Time||5 mins||Near to instant||2 mins||Near to instant||Near to instant||1 min|
|Consensus Mechanism||Proof of Stake||Proof of Stake||Proof of Stake||Proof of Stake based on Byzantine Fault Tolerant|
|Proof of Stake based on Byzantine Fault Tolerant|
|Delegated Proof of Stake based on Directed Acyclic Graph|
In general, it is often easier to create an entirely new system than to patch up issues in an existing one. This is almost always the case with blockchains. As a result, many chains have popped up that far surpass Ethereum in terms of features, consensus, and ability to facilitate dApps and DeFi.
Touted as the fastest chain on the market, Solana can theoretically process up to 65,000 transactions per second (TPS) with extremely low costs per transaction ($0.00025), compared to Ethereum’s 30 transactions per second with a cost of $1–15 per transaction. Solana’s functionality opens up the possibility of using it as a network — an idea they are playing around with, as demonstrated by their plans of building their own Android phone that runs on dApps. Solana also allows for smart contracts, dApps, and DeFi, the supposed competitive advantages of Ethereum.
Avalanche is also extremely fast and has a high TPS, but on top of that, it is also EVM compatible, meaning that any contract that is written inside the Ethereum Mainnet can also be duplicated and put onto Avalanche. This unique feature makes it much easier for coders to switch between chains and cryptocurrencies.
Avalanche is made up of three internal chains, with one designed to create and exchange digital assets, one to coordinate validators, and one to enable all Ethereum-compatible smart contracts. They also have the unique feature of “subnets,” or the ability for Avalanche users to join internal decentralized networks, essentially allowing for the creation of a decentralized network inside a decentralized network and opening new possibilities.
To Switch or Not to Switch
The flaw in traditional arguments for Ethereum is that they compare blockchains to conventional fintech companies. These are not fintech companies. These are decentralized organizations that are frictionless. The cost of transferring Ethereum’s ether (the currency of Ethereum) to Avalanche’s ether, or to Solana’s sol, is extremely low. Transferring contracts is not frictionless yet, but will be soon.
In fact, the largest smart contracts on Ethereum are those that facilitate the exchange of ether for other cryptocurrencies like Cardano, Avalanche, and Ethereum Classic. The same goes for dApps, like OpenSea and Uniswap V2 and V3.
The Second Best Time is Now
To be clear, the Merge was not a bad decision. It was just late. Vitalik Buterin, the most respected developer and talking head representing the Ethereum chain, has plans to turn Ethereum into a high-frequency, secure, decentralized, and innovative chain. These new features have been dubbed the “surge” (increasing transactions per second), the “verge” (increasing security by increasing the number of validators), the “purge” (removing old transactions to decrease the barrier to entry to be a node), and “splurge” (fun additions). If all of these features are implemented in the next few years, it would revolutionize the chain and maintain its position at the top. But the implementation of this many new features is doubtful, considering that it took eight years to complete just the Merge alone.
Being the largest chain with contracts and having its own programming language (Solidity), Ethereum still has a lot going for itself. But the clock is ticking, and it is only a matter of time before other chains eat away at Ethereum’s dominance.
- By traditional metrics, Ethereum is the king, especially after the Merge.
- But these statistics have nothing to do with what Ethereum actually is: a decentralized codebase
- The reason why Ethereum is different from Bitcoin is that it permitted, for the first time, code to be stored on new transactions, allowing people to put “smart contracts” onto the chain.
- So what was the purpose of the Merge? It did not add any new functionality but rather deprecated the outdated proof-of-work technology.
- Many chains have popped up that far surpass Ethereum in terms of features, consensus, and ability to facilitate dApps and DeFi.
- To be clear, the Merge was not a bad decision. It was just late.
- Ethereum still has a lot going for itself, being the largest chain with contracts and having its own programming language (Solidity).
- But the clock is ticking, and it is only a matter of time for other chains to eat away at Ethereum’s dominance.