Bitcoin After the Ethereum Merge: Experts Weigh In

How exactly will the Ethereum Merge impact Bitcoin?

Ethereum, the blockchain that underpins ether (ETH), the second-largest cryptocurrency by market cap and worth almost $200 billion, will attempt to do something that no major blockchain has ever done before: switch the consensus mechanisms that computers use to accept on the state of a network from proof-of-work to proof-of-stake. This will be the first time that this has ever been attempted by a major blockchain. What kind of an effect would this process, which is being referred to as "the Merge," have on the most widely used cryptocurrency, bitcoin (BTC)?

Obviously, Ethereum itself will be the one to experience the most effect. The first stage, which is also the most important one, is for Ethereum to successfully carry out the Merge. Should the Merge not be successful, the consequences for the Ethereum community would be devastating. On the other hand, the tremendous amount of testing that has been performed on the network over the previous several months makes the possibility of this unfavorable consequence very remote.

On the other hand, it is anticipated that the Merge will have little to no immediate effect on Bitcoin. Regarding ether's position in respect to bitcoin, the majority of industry professionals seem to be in agreement that any ensuing price swings would most likely be fleeting. After all, the transition from proof-of-work to proof-of-stake for Ethereum has been on the to-do list of the network ever since it was created.

"Proof-of-stake was a very crucial topic that was considered from the very beginning, and it is now being implemented.... In an interview on CoinDesk's "First Mover" program, Ethereum co-founder Anthony Di Iorio said that "it has been a long time coming."

It is plausible to presume that the rippling impact of the Merge has already been reflected into market pricing (at least somewhat), since this would be consistent with logic.

"There is a growing body of evidence to suggest that the Merge will, in fact, take place... According to Alex Miller, CEO of Hiro, a Bitcoin-focused development business and affiliate of the Stacks Foundation, "every day you're pricing it in a little bit more," which means that you're always adding a little bit more cost.

The Flippening

Many people believe that Ethereum's market valuation may one day exceed that of Bitcoin, a phenomenon that has been facetiously dubbed "the Flippening." Will the Merge bring about the potential transition to the new leadership?

Miller doesn't think an imminent flippening is at hand.

"Bitcoin has, in my opinion, solidified its position as the primary asset. I think that there are several chains throughout the globe. But I believe bitcoin to be the equivalent of gold in the digital realm. It acts as a reservoir for value. In an interview with CoinDesk, Miller expressed his skepticism on the possibility of the flippening really taking place.

Christopher Calicott, managing director of Trammell Venture Partners, a venture capital company that focuses on bitcoin, had similar feelings.

According to my analysis of the market, bitcoin is the foundational monetary layer of the internet. Bitcoin would come out undamaged regardless of any market slump caused by dangers associated with Merge, according to Calicott's comments to CoinDesk.

In spite of the momentary increase in performance that the price of ether saw after the Merge, Joe Orsini, vice president of research at Eagle Brook Advisors, is of the opinion that bitcoin will continue to be the preeminent method of value storage over the long run.

During an interview with CoinDesk, Orsini said, "Ethereum may, of course, outperform in the immediate term, but ultimately, the opportunity set that bitcoin offers as that alternative store of wealth is undoubtedly bigger."

Others feel that the flippening may be assessed by a number of indicators other than market capitalization. For instance, Bitcoin now has around 15,000 nodes (computers that are part of a blockchain network), whereas Ethereum has approximately 9,500 nodes. On the other hand, compared to Bitcoin, Ethereum has a larger transaction volume, which is presently above one million daily transactions (approximately 270,000 daily transactions). Other indicators, like as active addresses and the number of projects developed on top of a network, might also be useful methods to assess dominance.

Because 70 percent of tokens are developed on Ethereum, it can be said that Ethereum is already the dominant cryptocurrency in many aspects. According to Niclas Sandstrom, CEO of investment company Hilbert Group, who spoke with CoinDesk, "If the Merge is successful, it will promote even more upgrades to Ethereum, and that should put it in a good position to also be the dominant currency in terms of market-cap terms."

Many people are adopting a wait-and-see attitude, despite the fact that there are a variety of opinions about whether or not the Merge represents the beginning of Ethereum's ascendancy. Those who do expect a rapid overthrow of Bitcoin are in the minority. Bitcoin will continue to be the "primary hedging tool" for cryptocurrencies, according to Joshua Lim, head of derivatives at Genesis Trading, who stated this until further notice. Genesis Trading is a division of Digital Currency Group, the parent company of CoinDesk, which also owns Genesis Trading.

The fate of proof-of-work

A successful Merge will validate proof-of-stake in the eyes of many. Will Bitcoin and Other power-hungry proof-of-work blockchains will eventually become unimportant.

"Proof-of-work is the most proven method in terms of the security of networks and the decentralization of power. "The verdict is yet out on whether proof-of-stake will be viable in the long run and to what extent it will be centralized as opposed to decentralized," Sandstrom said in an interview with CoinDesk.

In an appearance on CoinDesk TV on Wednesday, Alex Tapscott, managing director of the digital asset business at Ninepoint Partners, made the observation that "Bitcoin's hashrate is at an all-time high." To my mind, this presents a clear option right now [with] this straightforward and risk-free currency that is almost certainly going to be there for the rest of time. "And then there's the Ethereum thing, which is more of like a beautiful growth story that has lots of promise but much more – much more – hazards, in my perspective."

"I believe that the contrast is sort of poetic in that this is occurring at the same time as we are transitioning Ethereum to proof-of-stake, and Bitcoin is concurrently becoming its most secure it has ever been,"

The future of Ethereum's several proof-of-work splits is yet another significant concern about the Merge (groups that choose to remain on a proof-of-work version of Ethereum). Will they be successful in seizing a substantial portion of Ethereum's market share, or will they ultimately be rendered irrelevant?

Di Iorio said to CoinDesk that he does not believe there will be sufficient support for the proof-of-work protocol used by Ethereum in the long run. "I simply don't think there's going to be enough support for it," he said.

It is expected of him. After the historic DAO breach in 2016 prompted a controversial hard fork, he was one of the first people to witness Ethereum Classic's (whose token is ETC) breakaway from the main Ethereum chain. He had a front-row seat for the event. Indeed, Ethereum Classic has struggled significantly since that time, and its market valuation is presently somewhere around $5 billion, which corresponds to around 2.5% of Ethereum's total market capitalization.

It is still unknown whether or not Ethereum proof-of-work splits will continue to exist. Concerning Bitcoin, the majority of influential people believe that it will continue to use the proof-of-work consensus algorithm indefinitely and that the Merge will not have a significant effect on it.

"The Merge is the most significant event that has taken place in a considerable amount of time. It is not yet apparent how this will impact Bitcoin. "All we can do is wait and watch what happens," said Di Iorio.