Ethereum meltdown: when, why and what?

What if we answer the three questions above? Some of the most requested in crypto – let’s get to them.

Ethereum’s problems

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Ethereum’s problems are well publicized. Sometimes I like to complain that it has become a blockchain of the elites, like unaffordable gas prices. Do you want to buy a CryptoPunk NFT for $500,000? Then one can accept the gas price of $100, a surcharge of 0.02%. With credit card fees typically between 1% and 3%, that’s fine.

But not everyone has half a million dollars to spend on a pixelated avatar. If I want to mint my own NFT, for example on OpenSea (which runs on Ethereum), the same fixed amount is charged. So if I try to take the NFT below and list it for 0.01 ETH ($29), the $93 fuel price represents a 315% fee.

I have some extra time…

Obviously, it is totally unfeasible unless the transactions are very large. I have been waiting for my NFT to accumulate for six months; I long for the day when I can put it on Ethereum and set it as my verified profile picture on Twitter; you know, that cute hexagonal profile picture that symbolizes a verified NFT. Why? Because I am strange.

The day this NFT is minted will be the day Merge goes live. I’ll treat myself, a kind of celebration.

The changes

At this point, the ETH meltdown has almost taken on a mythical quality. Like the Loch Ness Monster in Scotland, some doubt they’ll ever see it, while others are avid believers. But it’s coming, don’t worry.

There will be two major upgrades, to what was previously described as ETH 2.0 (although the term is somewhat outdated). The first is the change of the blockchain authentication method, from Proof-of-Work (PoW) to Proof-of-Stake (PoS), and this is what is commonly known as merging. The move, according to the Ethereum Foundation, is expected to reduce the cryptocurrency’s energy output by as much as 99%.

The second major change is the implementation of sharding. This means that you have to split the blockchain into parts. In this way, the nodes deal with smaller amounts of data, instead of dealing with the entire blockchain as usual. More transactions can then be processed simultaneously, while no major concessions are made to security or decentralization. Sharding helps increase the speed of transactions, which is an important step in scaling capacity. Switching to proof of stake will greatly reduce Ethereum’s energy output.

With Ethereum currently limited to around 30 transactions per second (TPS), the network is often congested. Doggy tokens, tweets from Elon Musk and many other events often clog the network and drive up gas prices to mind-boggling levels. With fragmentation, among other technical updates, the hope is that the TPS can be increased to 100,000 per second.

That’s a high-level summary of the massive technical overhaul that is the merger, but the goals are much simpler to articulate: reduce those pesky gas fees, scale grid capacity, and increase sustainability.

These are clearly necessary. The chart below shows that my quote of $90 for sky-high gas costs actually comes at a time when gas is relatively “cheap.” Four weeks ago it would have been $300.

Ethereum gas cost, price in gwei (a denomination of ETH) – data via IntoTheBlock

Blockchain Trilemma

The cryptocurrency trilemma is the name we give to one of the biggest technical challenges of cryptocurrencies: how difficult it is to simultaneously solve three of the most important aspects of a blockchain without sacrificing one of them: scalability, decentralization and security. . The finer technicalities of the trilemma are beyond the scope of this article, but a clear and detailed description of them can be read here.

The hope is that Ethereum updates will bring it closer to thwarting this challenge. In visual terms, my absolutely beautiful drawing of the trilemma is below: you can easily pick one side of the triangle, but getting all three is the real challenge.

Bitcoin, for example, has mastered security and decentralization, but scalability is an issue (as it is PoW, currently similar to Ethereum). While BNB, the network launched by Binance, has an incredibly nice low cost – scalability and security work it out nicely, but with a total disregard for decentralization.

yes i can draw


So when? The question has become one of the most discussed in cryptocurrencies. Second after Bitcoin, Ethereum is the home of DeFi; the virtual builder’s playground; the trendsetter. The spatial impact is huge and the cryptocurrency is eagerly awaiting updates.

The frustrating thing is that there is no tangible answer to “when”. It was expected to go live some time ago, but there have been some pushbacks. This is uncharted territory – not only is this a brand new technology, but there has never been an upgrade of this magnitude to any other cryptocurrency. ETH has a market capitalization of $409 billion and thousands of developers build on it. It is really making an impact as a major asset, with billions of dollars moving through the blockchain on a daily basis, as you can see in the chart below, which shows total daily transaction volume since the start of the year.

Data via IntoTheBlock

Summer 2022

The strike was launched in December 2020, but since then many investors have grown impatient with what they perceive as a lack of progress. However, one should not underestimate the enormity of what is attempted here. Just researching how to safely switch from a PoW to a PoS mechanism is an important task.

Some of the brightest minds in the world are working on Ethereum and progress continues behind the scenes. Ethereum Foundation (EF) researcher Danny Ryan stated at ETHdenver last month that unless “something incredibly catastrophic” happens, the merger will take place within the next six months.

The testnets appear to be moving forward, with positive rumors emanating from developers and other experts. Reading between the lines, everything seems on track for a summer release. Once live, Ethereum miners get the cold shoulder and Ethereum becomes a full PoS network, a possibility that still seems crazy to write about, but very exciting.

search trends

Looking at Google Trends, interest in the merger has skyrocketed in recent weeks, with searches for “Ethereum merger” reaching unprecedented heights. This is most likely due to the successful merge into the Kiln testnet, and investors are starting to feel more confident that the big upgrade is imminent.

Searches for “Ethereum merger” hit all-time highs, via Google Trends

Extinction of the miners

Ethereum will then go “green”, with no ocean boil history to contend with. GPU cards become redundant, ASICS no longer. Big mining companies will give way to personal laptops and miners will have to migrate to other coins or find a new hobby.

Another big change is ETH inflation, which will drop by around 300 basis points at 1% per year, as there will clearly be no more new supply currently being distributed to miners. Perhaps ETH will even become deflationary as trades require a burn of ETH.

My gut says we’ll get our updates by summer. If we don’t have the merger by then, I’m going to throw my toys out of the stroller, but I’m sure it won’t come to that.

We are almost there. I’m excited.

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