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Crypto veterans share misconceptions about upgrading

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Crypto veterans share misconceptions about upgrading
  • Prior to the merger, Insider spoke with 4 crypto vets who debunked common myths about the upgrade.
  • Critics say Ethereum’s move from a proof-of-work model to a proof-of-stake model could put the network at risk.
  • All say, despite misconceptions, that the merger will not reduce Ethereum gas fees.

The Ethereum upgrade, the merger, is fast approaching. Scheduled for mid-September, industry veterinarians called it the most important event in crypto history after the invention of bitcoin and ether.

Although the merger does not address all common complaints associated with the smart contract network, it is touted as a way to reduce power consumption by over 99% and lays the groundwork for future upgrades. With any highly anticipated event – ​​and especially one that can influence the trajectory of a trillion-plus industry – comes a treasure trove of rhetoric and misinformation online.

Insider spoke to four industry experts, including a longtime Ethereum developer, a crypto executive, and digital asset fund managers, about the biggest misconceptions surrounding the upgrade.

Ben Edgington, lead product owner of blockchain software company ConsenSys, says the biggest misconception is that the merger will reduce the cost of transactions on the Ethereum network.

These costs, also known as Ethereum gas costs, are the amount of ether needed for a user to interact on their network, which can vary depending on congestion and usage. To mint a non-fungible token on Ethereum, for example, some buyers pay more in fees than for the digital collectible itself.

“This idea has been around forever and is regularly refuted. People think that the merger will dramatically reduce gas fees on Ethereum. That’s a separate track and we’re working on that as well. parallel, but it’s not the Merge in September,” Edgington, who has been working on the upgrade for 4.5 years, told Insider. “I think that’s the biggest general misconception, and I’m afraid there’s some disappointment about it.”

Harry Kalodner, CTO and co-founder of Offchain Labs, echoed Edgington, adding that the merger itself will only replace Ethereum’s consensus layer with the Proof of Stake beacon chain while “leaving the same ‘chain execution’.

“This is often confusing because Ethereum has an extensive roadmap of improvements that has changed over time,” Kalodner said in a statement to Insider.

Changes that increase capacity and decrease cost will come from other upgrades, according to the crypto exec, but they “will generally aim to reduce the cost of using rollups and won’t happen until next year at most. early”.

Vance Spencer, co-founder of Framework Ventures, a $1.4 billion crypto-venture company, says reducing electricity consumption is huge for the ecosystem and isn’t emphasized enough. “It’s a fundamentally positive thing and being on the right side of things like climate change and the ESG narrative is really important,” Spencer told Insider.

Critics also say that Ethereum’s move from energy-intensive proof-of-work (PoW) model to proof-of-stake (PoS) model could put the network at risk for security as well.

“There are a lot of straw man arguments about security. I objectively think PoS security is superior to PoW, but PoW maximalists will argue because it’s secure with its own token that it can’t be really secure,” Edgington said, comparing Bitcoin’s network to Ethereum’s smart contract network.

He continued: “They claim there’s a circularity to the argument and that the only real way to secure a chain is to have externality burning power… We secure that with real global value that people have invested in the protocol, real dollars.This argument is specious, but it seems to be very common.

Hal Press, the founder of digital asset hedge fund North Rock Digital, says another misconception is that ethereum has no valuethat it’s “just a funny little silver token”.

Under PoW, there is “no connection” between what a holder owns and the revenue generated by the network, other than it indirectly affects its security as it provides more incentive for mining. That dynamic shifts to a point-of-sale model, Press told Insider.

“On the outlets, all of a sudden, the holders capture the fee. They get it directly when they stake and the rest is burned. To equate it to stocks, it’s actually a dividend in shares and a stock buyback. . Ethereum has 100% net income margins because the network has virtually no expenses,” he said.

The press continued: “So all proceeds are either used to buy back Ethereum tokens or distributed to holders. In this context, it’s not just this game of chicken trying to figure out who’s going to pay you more for Ethereum six months from now. It’s actually a really fundamental thing that gives you ownership of this protocol. As activity on the network increases, so does your value.

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