THE BRIEF
a real-world application.
C RY P TO C U R R EN CY
Merging Toward
the Mainstream
Ethereum’s Merge tackled its
pollution problem. But widespread
adoption is no sure thing.
BY TAYLOR LOCKE
STEPS AWAY FROM the Temple
of Poseidon, a monument to
the golden age of Athens, sits the
five-star Cape Sounio hotel. There,
last October, more than 40 block-
chain developers descended for a
high-stakes workshop they dubbed
Amphora. Outside, tourists explored
the beauty of Greece. For their part,
the devs sat in the hotel’s beige,
mostly windowless basement. For
several nights they pounded out code
until a dawn they did not see broke
over the Aegean.
The devs had gathered from all
corners of the globe to push forward
the most ambitious project in block-
chain history—one that many in the
crypto world deemed impossible. The
plan entailed preparation for an up-
grade to Ethereum that, if they could
F O R T U N E O C T/ N O V 2 0 2 2 2 7
pull it off, would wipe away
more than 99% of the
popular blockchain’s future
carbon footprint, while
also laying the groundwork
to bring crypto into the
mainstream. The project
would come to be known
simply as the Merge.
Almost a year later,
on Sept. 15, the Merge
became a reality. What it
will mean for the future
of Ethereum, and for how
business uses the block-
chain, will be debated for
months to come.
For those familiar with
Ethereum’s history, the im-
age of ambitious develop-
ers crammed into a spartan
space is fitting. Eight years
ago, a similarly frenetic
group piled into a mat-
tress-strewn house in Zug,
Switzerland, to turn Ethe-
reum—an idea that was
still little more than a white
paper authored by then-
teenaged genius Vitalik
ILLUSTRATION BY
JOSUE EVILLA Buterin, its creator—into
The Zug crew eventually
succeeded, and Ethereum
is today the most popular
blockchain in the world in
terms of both applications
and user numbers.
The challenge in Greece
was of a different order.
Despite its success, Ether-
eum has been dogged by
criticism that its transac-
tion speeds are too slow,
and that its computing
process is an ecological
catastrophe. The envi-
ronmental criticism, in
particular, threatens to
overshadow the achieve-
ments that have made
Ethereum the pulse of the
crypto ecosystem.
While casual observ-
ers often lump Ethereum
in with Bitcoin, the two
blockchains are very differ-
ent. Ethereum has about
half the market value of
its counterpart, but its
versatility and technologi-
cal potential far outstrips
Bitcoin’s. This is primarily
because of its ability to run
smart contracts, collections
of code that execute a set of
instructions on the block-
chain, which have powered
the field of decentralized
finance, or DeFi. Ethereum
smart contracts also under-
lie a wealth of other tools
and applications, including
NFTs, gaming, and new
forms of music royal-
ties—the kinds of projects
that generate excitement
outside the die-hard crypto
community.
But Ethereum was also
built to rely on the same
record-keeping model
as Bitcoin—a “proof-of-
work” system that issues
rewards to those deploying
2 8 F O R T U N E O C T/ N O V 2 0 2 2
raw computer power to
add blocks to the block-
chain. That process has
proved to be incredibly
energy-intensive. A recent
academic study found that
the “mining” of Bitcoin
consumes over 96 terawatt-
hours of electricity per
year—more than all of the
Philippines.
All this has led critics to
blast Ethereum as a major
polluter and, in some cases,
to seek out newer block-
chains like Solana that can
perform smart contracts
without the energy guz-
zling. The issue has also
preoccupied Ethereum
developers, who have talked
about making their pre-
cious creation more green.
Their long-planned solution
turned on “proof of stake”—
a newer technology that
relies on a trusted network
of validators to verify trans-
NO INSTANT UPGRADE
Ethereum’s Merge had little impact on the price
of Ether tokens—which, as with most crypto-
currencies, has been depressed by bigger
macroeconomic factors over the past 12 months.
$5,000
4,000
3,000
2,000
1,000
0 ties, a controversy that
SEPT. 22, 2021 JAN. 1, 2022
actions rather than brute
computer power. Shifting
to proof of stake would
mean a radical reduction
in energy use, but also
entail a high-stakes tech-
nological gambit many
predicted would fail.
For the developers who
crisscrossed the world for
Ethereum hackathons,
the Merge—so named
because it involves
merging a proof-of-stake
network with the main
Ethereum blockchain—
became all-consuming.
Parithosh Jayanthi was
one of those huddled
in the hotel basement
last October. “[It’s] the
most impact any of us
individually could have
to help [prevent] climate
change,” Jayanthi told
Fortune, adding that
he viewed it as a way to
counteract “probably the
ETHER PRICE
SEPT. 23, 2022
$1,325
JUNE 1, 2022
SOURCE: BLOOMBERG
THE BRIEF — CRYPTOCURRENCY
“IT’S THE MOST IMPACT ANY OF
US INDIVIDUALLY COULD HAVE TO
PREVENT CLIMATE CHANGE.”
—PARITHOSH JAYANTHI, ETHEREUM DEVELOPER
carbon budget of my en-
tire life … which is insane
to think about.”
Skeptics point out that
even post-Merge, Ether-
eum faces major bar-
riers to wide adoption.
Molly White, a prominent
crypto critic and software
engineer, says that the
Merge might spur eco-
conscious companies to
try Ethereum, but won’t
address complaints that it
is sluggish and that its “gas
fees” (transaction fees, to
normies) are too high. “If
that was something that
was changing, then I can
see that changing the nar-
rative, but it’s mostly not
doing that,” White says.
White and other critics
still view Ethereum and
other blockchains primar-
ily as tools for financial
speculation. (On that front,
the Merge may be a disap-
pointment. The change has
reduced new issuance of
Ether tokens, which could
lead to a future price jump,
but even some boosters say
it’ll be largely irrelevant to
Ether’s market value.) Oth-
ers note that the Merge will
not make Ethereum easier
for ordinary people to use.
Meanwhile, Ethereum and
other popular blockchains
are stuck in a regulatory
morass over whether their
tokens are illegal securi-
has made some businesses
reluctant to start working
with the platforms.
Ethereum supporters,
undaunted, see the Merge
as a “critical precursor”
to making Ethereum
cheaper, faster, and more
user-friendly. Main-
stream banks like Bank
of America and others
have also predicted that
the Merge will lead to
more mainstream adop-
tion of Ethereum. That
would include investors
hoping to profit from
new, post-Merge staking
opportunities, but also
businesses hoping to use it
to underpin new tech ap-
plications and to execute
contracts and transactions
in non-crypto assets and
industries like real estate,
finance, and retail.
Such predictions will
soon be tested. Still, devel-
opers were thrilled to have
accomplished the proof-of-
stake transition on Sept. 15
without a hitch. Though it
was past 3 a.m. for many
when the official Merge
occurred, the Ethereum
community showed no
signs of exhaustion, cel-
ebrating on Zoom or par-
tying in person in Berlin.
Only time will tell if the
Merge catalyzes a golden
age for Ethereum that lasts
for the long haul.
Get more blockchain news
at fortune.com/crypto.
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