How will the Ethereum merger change the NFT scene? – ARTnews.com

Ethereum just got a lot more environmentally friendly. On Wednesday, the team behind Ethereum upgraded its software architecture in what is being referred to as “the merger.”

As part of this update, Ethereum moved away from using proof-of-work system, which requires large amounts of computational energy to “mine” Ethereum and has been criticized for how its exorbitant electricity use releases large amounts of carbon emissions, a proof ofeffort system, which allows users to validate new blocks on the chain (the so-called permanent ledger) and earn new Eth tokens by providing existing Eth tokens as collateral in a process known as staking.

Proof-of-stake is much more environmentally friendly and will reduce Ethereum’s overall carbon dioxide levels by 99.992 percent, according to recent studies. (Ethereum’s website has compared the switch to being roughly equivalent to the entire annual electricity consumption of Finland.)

However, proof-of-stake is not new – it is already in use by Ethereum’s competitors, such as Tezos and Solana. Ethereum’s switch took so long because it was originally built on a proof-of-work system, and managing to convert the architecture seamlessly was a complicated technological feat that at various points seemed impossible to solve. But the rebuilding, which started on Thursday, has so far gone very well.

“This is one of the most important moments in crypto history so far,” Josh Hardy, director of technology for NFT platform Daata, told ART news. “There was so much fuss about the environmental issue, and it has been a real factor that has worked against the whole movement. It was a perfectly legitimate concern, but the fact that it justified whole other blockchains is kind of crazy.”

Like many others in the NFT space as the environmental debate raged around Ethereum, the team at Daata seriously considered getting the artists’ work minted on an alternative chain, such as Tezos, which was already proof-of-stake. But Hardy pushed to continue building on Ethereum. “I knew the merger was coming,” he said, explaining why it didn’t make sense for Daata to switch to alternative chains that were less valuable. At its peak, Eth was trading around $4,000 per token, while Tezo’s peak was around $8.

Although the environmental debate frustrated Hardy at times, he acknowledged that he does not believe the merger would have happened on such an accelerated timeline had it not been for an outcry from environmental activists. “I think the Ethereum Foundation people really pushed it for that reason,” he said.

Jon Perkins, co-founder of NFT marketplace SuperRare, see rationale for the merger different. “I remember going to conferences in the very early days, and proof-of-work was always talked about as some sort of necessary evil to get Eth off the ground,” he said. “But the developer community said, basically from day one, explicitly that the plan was to migrate to proof-of-stake as soon as possible.”

That the merger comes after 2021’s bull run for NFTs and cryptocurrency in general and the criticism that accompanied it should not be excluded. Regardless, for those in the NFT space, this is a big win in a difficult time. After the 2022 crypto crash, the crypto market went from a $3 trillion valuation to $1 trillion, and the NFT market reflects that with greatly reduced sales volume.

Designed by Vitalik Buterin when he was still a teenager and launched in 2015, Ethereum had some major technical limitations that he planned to address in stages. One of the upcoming technical tweaks will address another major issue: Ethereum’s loading capabilities. Transacting on Ethereum can be prohibitively expensive when many people use the system, causing spikes in what are known as “gas fees,” which can range from $10 to thousands, depending on the type of transaction. Now that the merger has gone well, there is a boost of confidence that the developers can actually pull off these others Changes. Because there was uncertainty as to whether these fixes could be resolved, building on Ethereum had been seen as a bit of a chance.

“When we started building on Ethereum in 2017, we put a lot of faith in the future moves that the core developers would take in this open source ecosystem,” said John Crain, SuperRare’s other co-founder. “The success of this instills a lot of confidence for the future because it reduces a lot of the risk of building on Ethereum in the long term.”

Crain and Perkins hope that the merger will allow NFTs to not only return to the levels of their peak in mid-2021, but encourage more people than ever to enter the space.

“There are probably hundreds of thousands of people who have been waiting on the sidelines who now feel they can participate in the crypto market in the coming months or year,” Perkins said.

Now that Ethereum is as environmentally friendly as other proof-of-stake chains, the question of whether alternative chains can really hold their own against Eth – without the environmental benefit – is up for debate. But Joanie Lemercier, an artist and environmentalist who has characterized her work on Tezos since its inception, has no plans to leave Tezos anytime soon.

“I’m not a millionaire like the few friends I have who minted Ethereum and dismissed the environmental issues,” Lemercier said. Still, he doesn’t regret the decision to stamp Tezos, citing that while his work didn’t sell for “ridiculous” prices, sales have been steady and haven’t been nearly as affected by the crypto crash as artists traded on Ethereum. He says he’s had similar sales to last year, making more money than he does with his physical work sold through a gallery in New York.

“And the fact that the merger didn’t really help push the value of Ethereum is not a good sign,” Lemercier added. “Since the sale of Ethereum is very bad, there is no benefit to switch now, it just doesn’t sell.”

It’s true that the price of Ethereum barely budged – Eth is currently worth around $1,400, down more than 60 percent from the value of Eth this time last year – even as the good news flooded news sites and social media. But it’s still early days.