Was the Ethereum Merge a Mistake?

“What do you think of the merge?” I recently innocently asked William “Wills” de Vogelaere, co-founder of Spankchain and probably half a dozen other protocols in the grisly underworld of Ethereum.

I was, of course, referring to the long-awaited software upgrade which booted Ethereum’s miners and replaced them with a cohort of environmentally friendly stakeholders on September 15. 

“You mean Ethereum’s delusion?” de Vogelaere rejoined bitterly. 

“Oho!” I thought. This could get juicy. It turned out de Vogelaere was voicing an opinion rarely broadcast in public: that the merge was a mistake. Or, if not an italicized mistake, some kind of irrelevant distraction. 

“It didn’t add anything of value really other than the environmental factor,” he fulminated. 

In de Vogelaere’s view, the whole enterprise has been a naive capitulation. The influential people fretting about Ethereum’s enormous carbon footprint, he said, were only ever exploiting environmentalist fears for their own cynical ends. “No one actually gives a shit if something’s green, so long as it works,” he said. “Corporations don’t fucking care as long as they can be perceived to care.” 

Maronn’! Admittedly, it’s not hard to see why people like de Vogelaere are in a bad mood—since the merge unfolded, the price of ETH has tanked. Bitcoin supporters are ridiculing the change. Dark mutterings about Ethereum now being a “security” have raised the hackles of even the most old-school of Ethereum connoisseurs—and even driven some to the embrace of a long-ago spurned band of fanatical Ethereum militants. (We’ll get to that.) 

As de Vogalaere told me, the notion that public opinion of Ethereum would improve in the wake of the merge may have proven to be a canard. The regulators, he said, will hardly change their tune now this one environmental grievance has been eliminated, especially given that newfound willingness to brand it a security. 

And yes, yes, the merge was a fabulous display of technical competence. Merging Ethereum in real-time was the equivalent of switching up a car’s engine as it booms full-throttle down a freeway, so we’re told. It’s groundbreaking from an R&D perspective—but so was the atom bomb.

Even so, de Vogelaere believes, the supposed technical improvements of the merge are overhyped. It was supposed to facilitate various upgrades that would introduce more efficiencies into the network. But de Vogelaere believes these solutions have long existed anyway, in the form of sidechains—appendages to the flagship network that use different validation methods—such as Polygon. Only Ethereum’s computing environment, the “Virtual Machine,” has any real value, he argued—and that isn’t affected in any meaningful way by the shift to the staking model. 

He also (good heavens!) pointed out that those who don’t have the minimum amount to stake independently—32 ETH, around $42,500 dollars and dropping at time of writing—have to stake via centralized exchanges like Coinbase. That means putting the majority of Ethereum on a corporate exchange with a single point of failure. 

So, we’ve established that Ethereum’s price is now in the shitter and the regulators are on the move. But is de Vogelaere’s view perhaps just a minority one? 

Not so! Kristy Leigh-Minehan, a longtime Ethereum miner (who may admittedly be a little bit biased), is not quite anti-merge in the same rancorous vein as our de Vogelaere. Rather, she wonders whether it came about a bit too soon. “The move to proof of stake is a key part of Ethereum’s DNA and was always intended,” she said. “It was necessary and required for future optimizations and scalability features—the question everyone needs to ask themselves is: was now the right time?”

Minehan isn’t so sure. “I, personally, do not think it was in the current regulatory climate,” she said. She wonders whether the prospect of ETH being newly classed as a security could risk “scaring validators, operators, and entrepreneurs.” The primacy of American regulators in particular, she added, can be unnerving. Echoing de Vogelaere, she said: “There is no denying Ethereum has taken root in the USA–that will be its biggest strength and weakness.”

At least some pedigreed Ethereum advocates remain sanguine. “It could be the case that this has some impact on regulatory decision making,” ventured Mat Dryhurst, a left-leaning podcaster and one of the earliest adopters of NFTs. “But to be honest, I don’t get much of an impression that is too much of a concern on the dev side. People are excited to build more utility for the network, and the merge felt like a celebration of another milestone on a long roadmap.”

But isn’t it admittedly a bit overhyped? “It is not a grand technological innovation, and I don’t think it was intended to be,” Dryhurst demurred. “Rollups, zkEVMs [zero-knowledge virtual machines] etc are still needed to scale. I think if anything it just establishes credibility for this corner of crypto, and increases confidence that other ideas being discussed will be executed upon.” He added that he was recently at ETH Berlin and that the energy was “as optimistic as ever.”

The gleeful old guard

There is, maybe, one cohort that fully agrees with all de Vogelaere and his ilk’s dire diagnoses of the merge—and is unabashedly jubilant about them. They are the custodians of another now-defunct network that, they would argue, was, like the miners, also betrayed by the craven handlers of Ethereum proper: an older, abandoned iteration of Ethereum network called Ethereum Classic whose supporters are arguably the most OG that you can get in the brief but melodramatic lifespan of Ethereum politics.

Ethereum Classic was born in 2016 in the wake of a deleterious hack of the Ethereum network’s first decentralized autonomous organization, or The DAO. Mainstream Ethereum developers voted overwhelmingly to “roll back” the hack and make victims’ whole, which a few sticklers viewed as a deadly betrayal of Ethereum’s core principle of immutability. They clung to the old, hacked network, and Ethereum was cleft in two. They have been waiting ever since for the merge, believing that newly unemployed miners (whom they actively tried to seduce) would flock to Ethereum Classic in search of new revenue. 

Incredibly, after six years of patient anticipation, they were right. 

“We’ve seen significantly increased interest in Ethereum Classic in the last couple of months,” said Bob Summerwill, the executive director of the ETC Cooperative, the foundation behind the development of Ethereum Classic, whose ticker is ETC. “The merge was obviously a catalyst.” He added that the amount of mining power on the network has since increased around tenfold, and that Ethereum Classic is now the third largest proof-of-work chain by market cap and second by volume. 

Summerwill, as with others, pointed out that fears around U.S.-capture of the network and newly vigorous regulators may have galvanized many of these miners and driven them to ETC. “Ethereum Classic seems to be benefitting from providing a known and likely safer alternative on these concerns,” he said. It has nevertheless been a bumpy start: Ethereum Classic, as with many others, took a recent dip, and its miners are operating at a loss. “We’re still trying to find a new equilibrium,” Summerwill said. 

Still, it’s a somewhat stunning reversal. After years of agonizing waiting, you have to wonder whether the curmudgeonly old pedants of the Ethereum Classic network—and, even, Ethereum’s would-be regulators—have got the last laugh. 

As de Vogelaere said: “ETH may have played its motherfucking self.”