A Coinbase (COIN 0.14%) executive just explained the best part of the long-awaited Ethereum (ETH -4.46%) Merge. Coinbase COO Emilie Choi pointed out Ethereum’s most exciting strength — and how the platform upgrade shines a spotlight on this quality.
The Merge is in the books now, and cryptocurrency investors should keep an eye on how Ethereum executes its move from a proof-of-work (PoW) platform to a proof-of-stake (PoS) system. In Choi’s view, the journey is more important than the destination.
What is The Merge?
Around 2:40 a.m. ET on Thursday, Ethereum started merging its digital ledger with a new system, formerly running as a testing network known as the Beacon Chain. Ethereum’s developers and blockchain node operators had executed a couple of mergers on smaller test networks, and all signs pointed to a successful platform upgrade on Ethereum’s main network.
As expected, The Merge went off without a hitch. Leading crypto-trading platforms such as Coinbase, Kraken, Binance, and Robinhood Markets paused transactions for Ethereum and Ether-based tokens for a few hours, giving the technology update time to roll out. Today, Ethereum’s transactions are validated by a much faster system that requires just 0.05% of the electric power that the old PoW platform consumed.
This game-changing move has been in the works for six years, and also sets the stage for three more rounds of important network upgrades. Ethereum co-founder Vitalik Buterin considers Ethereum’s functionality to be 55% complete after The Merge, leaving plenty of room for further improvements.
What Choi said
That’s where Emilie Choi comes in. Choi delivered this crucial insight at the annual Goldman Sachs Communacopia + Technology Conference earlier this week:
“I think the most important thing that [The Merge] represents is that there can be continued sustained technological development done by decentralized communities at scale,” she said. “To me, that’s the most important kind of takeaway about the Ethereum merge.”
This is important. Like Buterin, Choi expects Ethereum to get better over time. This platform was designed with long-term flexibility in mind, allowing Ethereum to overcome expected challenges and uncharted surprises via platform updates. The Merge was a fantastic example of this capability, proving that the network can undergo truly fundamental changes without breaking the crypto platform.
The next few updates will continue to lower transaction costs and boost execution speeds. They will also introduce a work-sharing feature known as sharding, improve Ethereum’s security model, and expand the system’s scalability. In the long run, Ethereum will evolve to take advantage of improvements in computing systems. For example, the Ethereum network of 2030 might secure and validate its transactions with quantum computing systems.
What’s good for the Ethereum goose may not be right for the Bitcoin gander
Every cryptocurrency indeed has some capacity for platform upgrades, but the Ethereum community takes this quality more seriously than most of its peers. Bitcoin (BTC -1.07%) has barely changed since its launch in 2009, apart from a few tweaks to tackle unexpected security issues. The unchanging nature of Bitcoin is an advantage because its holders can trust that the long-term supply is limited to 21 million coins.
However, the largest cryptocurrency should probably consider switching from PoW to PoS (or another validation system with lower computing and power requirements) someday. That change took years of planning and testing in the more flexible Ethereum community. Will we see a proof-of-stake version of Bitcoin in this decade? Probably not.
So the two leading crypto names are walking down strikingly different paths. One size does not fit all cryptocurrencies, and that’s quite all right. Each digital coin was designed with a unique set of features and long-term goals, and those fundamental differences will always drive their development. In Ethereum’s case, an openness to new ideas is the name of the game and investors should embrace that attitude.
The Merge showed us that even ambitious platform changes can take place without a hitch. As Choi said — and Buterin would surely agree — sustained development is the secret sauce in Ethereum’s recipe for success.