Ethereal‘s (ETH -7.03%) The long-awaited update, The Merge, has finally arrived. After months of delays, the upgrade was successfully completed on September 15, and the blockchain officially transitioned from a proof-of-work (PoW) to proof-of-stake (PoS) mining protocol.
This is one of the biggest and most historic transitions in cryptocurrency history and will open a new chapter for Ethereum. Not only will a PoS model use around 99.95% less energy than PoW, but the developers say it will also make the blockchain more secure and scalable.
So far, The Merge appears to be a success on all fronts. Does that mean now is the time to invest in Ethereum?
The future is brighter for Ethereum
In recent months, many critics have raised concerns about The Merge, saying that the update could lead to bugs, hiccups, and other disruptions to the blockchain. Some were also skeptical that The Merge would happen, especially after multiple delays.
However, now that the update is complete, you should put some of those concerns to rest. While no one knows exactly how this will affect the price of Ethereum in the coming weeks or months, The Merge played out in the best possible way, which is a very good sign.
This update is also encouraging for those concerned about the long-term environmental impact of cryptocurrencies.
One of the biggest criticisms of cryptocurrencies, particularly Bitcoin and Ethereum, is its massive environmental footprint. The PoW mining protocol is incredibly energy intensive, and Bitcoin uses more electricity than the entire country of the Philippines.
The merger will reduce Ethereum’s energy usage by more than 99%. Not only is that good for the environment, but it can also alleviate many investors’ concerns about cryptocurrencies. Also, because Bitcoin still uses a PoW protocol, this upgrade could help Ethereum bridge the gap between it and its biggest competitor.
The disadvantage of The Merge
While The Merge was successful and a big step in the right direction, it won’t do much to solve two of Ethereum’s other most pressing problems: its lack of speed and high transaction costs. Right now, the blockchain can only process around 14 transactions per second.
That causes a lot of congestion on the network, resulting in higher gas fees or transaction costs. While The Merge may increase speeds marginally, it probably won’t be enough for users to notice a difference.
The good news is that this is not the last update on the horizon, and the Ethereum developers have plans to improve the blockchain in these areas. However, that update likely won’t happen until 2023 or 2024, assuming no future delays.
Should you invest right now?
Ethereum is not perfect, but it is taking constant steps to improve. It is already the second most popular cryptocurrency behind Bitcoin, it is the most used blockchain for decentralized applications and The Merge will make it much more environmentally friendly. It has also been shown to be able to handle complex and difficult upgrades, which can improve investor confidence.
Ehtereum remains speculative, so if you choose to buy, make sure you are willing to take on higher levels of risk. After all, even the strongest cryptocurrencies have no guarantee of success. However, there are many factors in favor of this crypto.
While no one knows exactly how Ethereum will perform in the future, it could be a fantastic long-term investment if it continues to make constant improvements.
Katie Brockman has positions in Bitcoin and Ethereum. The Motley Fool has positions and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.