Much hype has arisen from the long-awaited Ethereum upgrade, known simply as “The merger,” and this improvement will end all arguments about Ethereum’s environmental impact, and for that matter the effect of NFTs. This improvement has been in the works for many years now, and is part of a much larger path to a better blockchain.
Ethereum has brought many great innovations to the blockchain industry, including the code standard for non-fungible tokens (NFT). However, since Ethereum was the first blockchain to implement programs enabling these innovations, it also uses the same mechanism as Bitcoin to validate transactions, called “mining.” Because this process is energy-intensive, it results in everything running on Ethereum also being energy-intensive, which inspires the argument that NFTs harm the environment. At the same time, it is often cheaper and better to use green energy for cryptomining, and many Bitcoin -miners will seek out green energy sources for this reason, but it is often overlooked when cryptocurrency mining’s impact on the environment is addressed.
The Ethereum Foundation has spent years working towards its solution,”Ethereum 2.0,” and by the end of September, Ethereum will have fully merged with Ethereum 2.0. This new transaction validation mechanism relies on users “strike” their ETH to participate in transaction validation, which gives them an interest rate on that ETH, and will no longer require cryptocurrency mining. Although this mechanism is not perfect, this mechanism is far better for energy consumption and transaction efficiency, and as part of the Ethereum 2.0 roadmap will set the stage to begin scaling Ethereum’s network for a much larger load of users.
The merger will fix energy costs, but not gas taxes
A common misconception is that this upgrade will reduce Ethereum’s infamous transaction fees, called “gas taxes,” that prevents most users from enjoying the applications. Along with non-fungible tokens that have a large carbon footprint, users also have to pay absurd fees to get them. These fees are a consequence of Ethereum not being designed for use in scale, and result in high fees during periods of network congestion. Blockchain analytics firm Messari shows the average transaction fee paid by Ethereum users over any time frame. Between July 2021 and July 2022, average fees ranged between $4 and $47, while before As of June 2020, the average fee was less than $1. Sometimes these fees can rise to hundreds of dollars. The merger itself will not reduce these fees, but it is an important step towards the next improvement that will reduce them.
According to the Ethereum Foundation, after the merger is complete, the process of rolling out “cutting” can begin. With sharding, data storage requirements can be divided into hundreds of smaller “shards” of Ethereum powered by their own nodes, which significantly reduces the amount of data that needs to be stored on Ethereum. Sharding is the next milestone to reach after the merger is completed. By reducing the load on nodes running the network and reducing the data that needs to be stored by the base layer, transaction fees will be massively cut, and Ethereum will (finally) be affordable for most people to use.
The merger is a good step for Ethereum as it will remove the argument that Ethereum is bad for the environment. The amount of energy consumed to run Ethereum after The Merge will only be what the computers running it require, eliminating the need for energy-intensive mining rigs. While this doesn’t improve Ethereum’s gas fee situation right now, it sets the stage for the next phase of Ethereum’s development that will see fees reduced. Ethereum NFTs will not only be environmentally friendly, but they will also be cheap to produce and affordable for most applications. With use cases ranging from tokenizing professional services to trading as commodities, to representing property transactions on the blockchain, to using NFT domains to name crypto wallets, a better Ethereum will be a technological breakthrough that will be fundamental to the digital age.
Source: Ethereum Foundation 1, 2, Messari
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