Ethereum merge fork in the road as rival chains boom
Marius Ciubotariu, co-founder of Hubble Protocol and core contributor to Kamino Finance, says:
“The Ethereum merge, while a significant and hotly anticipated event, is unlikely to deliver the results many are hoping for.
From a price perspective, Ethereum’s move to Proof of Stake – slated for September 15 – has helped support ETH in an otherwise dismal down market, (although it is not immune to contagion from bitcoin slides that come after Jerome Powell coughs loudly).
Nonetheless, ETH remains down 4% on the month and 14% over three, and It would be surprising to see a significant rally from this. Rather, the implementation is expected to be a “buy the rumor, sell the news event”, with only bad news likely to move the needle significantly.
Such bad news could come from miners, who have been operating the chain since its very inception but are now effectively being shut out in the cold. As a result, a fork will likely be created – as it was in 2016 when Ethereum Classic was born to cleanse the chain of faulty code following TheDAO hack.
Ethereum has grown markedly since it’s earliest days. And so, while a fork is notsomething entirely new to the chain, its size means that if and when it does happen, the significance of the event has scaled with the significance of the chain.
Perhaps most importantly, though, the move to PoS is not in itself going to pave the way for the kind of explosive innovation and growth we saw between 2018 and 2020, before the big decentralized finance boom of the Covid era.
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Ethereum faces relentless challenges in the form of scaling and throughput speed and is now beset with bots that front-run investors at every opportunity. Also, we can expect that once normal traffic resumes, Ethereum gas prices will again be prohibitive for small to medium size traders.
This is why alternative, challenger chains are seeing their own decentralized finance networks grow significantly. Indeed, Binance Smart Chain has already taken a significant chunk of Ethereum’s turf with a total value locked of over $5.3 billion.
Meanwhile, Solana continues to stake its claim as the home to an entirely new generation of DeFi. Despite still being in beta, Solana has $1.4 billion of assets sitting on the chain, while daily trading volume of its SOL token stands at over $700 million – ranking it 9th among all cryptocurrencies. More importantly, some of the most innovative decentralized exchanges, yield farming, and liquidity optimization opportunities are available on Solana.
And so, merge or no merge, it is likely the most exciting development will happen on these new, much more nimble, and innovative blockchains. Indeed, Ethereum may have to pull an iPod-sized innovation out of its hat to bring new life back to the old chain.”