Ethereum Merge Narrative “Not Priced In”: Vitalik Buterin

The Ethereum creator added that the merger must “happen on a schedule” and discussed scalability developments in the ecosystem in a Bankless interview.

Buterin discusses the merger

The impact of Ethereum’s upcoming “Merge” to Proof-of-Stake will only be visible when the upgrade ships, Vitalik Buterin has suggested.

Talking in an interview with Bankless co-host David Hoffman at the Ethereum Community Conference last week, Buterin said the network’s long-awaited update could change sentiment in the crypto space. “Once the merger happens, morale will go way up,” he said, referring to the building projects in the Ethereum ecosystem.

He also said he believed the update was “not priced in” because it has yet to launch, clarifying that he was primarily talking about confidence in Ethereum rather than the price of ETH itself. “I basically expect the merger is going to be kind of, not priced in, and by that I don’t even mean just in market terms, but even just in psychological and narrative terms,” ​​he said.

Many Ethereum enthusiasts have predicted that the merger could act as a potential catalyst for ETH’s price to rise, but the market-wide decline in crypto prices has seen the asset currently far from its highs. Despite the rally this month, ETH is worth around $1,620 today, still 66.8% below its peak.

While market interest in ETH is down from late 2021 highs, the merger is set to be the biggest protocol update in Ethereum’s history. It involves “merging” Ethereum’s Proof-of-Work network with the Proof-of-Stake Beacon Chain, otherwise known as the execution layer and the consensus layer. Once the merge is submitted, Ethereum will use Proof-of-Stake and network validators to achieve consensus instead of relying on Proof-of-Work and miners. It is expected to bring several changes, such as greater energy efficiency and a reduction in ETH issuance because the protocol no longer needs to pay miners.

Buterin alluded to the energy efficiency point in his Bankless interview, saying that people often misunderstand Ethereum’s energy usage and how the protocol will change after the merger. “In narrative terms, I think it’s not going to be priced in until after it happens,” he said. “Even today, many people act as if this environmental issue is a fatal flaw.” Ethereum came under scrutiny for its environmental impact in 2021, largely thanks to a ban on crypto mining in China and the usual NFT boom.

Scalability and market cycles

During the interview, Buterin also reflected on the current state of the crypto ecosystem as the space endures a months-long downturn in the hangover from last year’s euphoria-driven bull cycle. He argued that there are benefits and costs to crypto’s cyclical nature. “[Market booms] attract a lot of people and get people excited, which is good, but they give people far too much of an impression of what the space promises,” he said, before taking a subtle dig at bad actors and politicians. “They get attention from unpleasant characters and governments who decide because it exists, it’s their business.”

Just as he did during his presentation at EthCC, Buterin also commented on other major technological developments happening in the wider Ethereum ecosystem. When discussing Layer 2 scaling solutions, he admitted that development had lagged behind market demand. “The scalability stuff didn’t come fast enough for this cycle, but for the next cycle it will,” he said, before noting that there have been promising developments with rollups and zkEVM solutions on the market.

He also acknowledged the need for Ethereum to “radically change things,” pointing to the merger and sharding as key upcoming protocol changes. And while he didn’t comment on the merger’s planned launch date, he said it can’t be delayed forever (the update has famously suffered years of delays and setbacks). “The merger actually needs to happen on a schedule,” he admitted.

Ahead of the mainnet launch, Merge will have a final walkthrough on the Goerli testnet. According to a member of the Ethereum Foundation Tim Beikowhich happens sometime between 6 and 12 August. The main event is currently planned for mid-September.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.