It’s the biggest event in blockchain in years – and Australian crypto fans are ready for it.
Barring an unforeseen catastrophe, Ethereum this week will undertake “the merge”, upgrading from an energy-hungry network to an environmentally friendly one that uses around 99.9 per cent less electricity.
“It is a pretty big event – to put it in perspective, it’s up there with the creation of bitcoin and blockchain itself,” says Lachlan Feeney, the founder of Brisbane-based consultancy Labrys.
Ethereum developers had talked about this transition – known as moving from “proof of work” to “proof of stake” in technical terms – back when the network was first created in 2015, he says.
“We’re now seven years later from when Ethereum launched, and we’re finally getting this upgrade.”
The second biggest blockchain by market capitalisation behind bitcoin, Ethereum is by many accounts the most widely used.
It serves as a leading platform for non-fungible tokens, or NFTs, and decentralised finance, and is also used for crypto gaming and data storage.
Once the merge is complete, so-called Ethereum “miners” who use substantial computer processing power to validate transactions in return for rewards will be made obsolete.
Instead, network transactions will be processed by “validators” who stake their tokens and are punished by losing them if they act dishonestly.
Labrys is planning a “merge party” to mark the upgrade for the 43 blockchain consultants that work its Brisbane office, Mr Feeney says, although the event has been hard to plan because the exact timing of the merge isn’t known.
Online calculators on Friday were estimating it would occur during the early hours of Thursday morning Sydney time, but it could happen a few hours later.
“We’re actually quite confident that the merge will be successful,” says David Angliss, an analyst with Apollo Capital, a Melbourne-based crypto investment fund.
Nonetheless, the firm is approaching the changes with caution.
“Crypto is experimental and still a very risky asset class,” Mr Angliss says.
“Crypto markets typically sell on good news, and there’s a lot of anticipation to big news events, so it could go either way.”
Mr Feeney says the current Ethereum network pays out $30 million a day in ether to pay the miners, but that will be cut to near-zero after the upgrade.
“There is a massive difference that happens post-merge,” he said.
It’s an open question whether that will mean any recovery in the price of ether, however.
On Friday, the cryptocurrency was trading at $A2,480 per token, less than half its value at the start of the year and about a third of its peak in November.
“People have made the argument that markets have already priced in the merge,” Mr Feeney says.
Another argument is ether will suffer a supply shock with the network changes, causing the cryptocurrency’s price to rise.
Michael Sloggett from MTC Education, a crypto social community and education platform, says he’s eager to see what will happen as the network becomes less inflationary.
“When that global selling pressure vanishes overnight, I’m excited to see what it does for positive price action,” he says.
“You know, it’s the first time a top-10 coin has ever done this.”
But Mr Sloggett believes the crypto market is still in an extremely bearish phase and values still have further to fall, although he’s bullish on the industry in the long-term.
Even after the upgrade, Ethereum will remain “a little bit broken for a little while” with transaction fees that continue to be too high, he says.
Developers have planned a series of rhyming upgrades to the network to deal with that and other issues in the years to come.
In an only-in-crypto twist, Ethereum co-creator Vitalik Buterin has dubbed these changes as the surge, verge, purge and splurge.