It's finally happened. The Ethereum Merge is here. It's a gargantuan event in the cryptocurrency world, changing the way Ethereum creates and manages its system, becoming more sustainable and scalable in the process. But why should marketers care?
Well, for a lot of reasons, actually. Number one: Ethereum is the number two cryptocurrency in the world. Number two: crypto is becoming more and more integrated into many marketing activities, thanks to a more decentralised mindset developing in consumers. Number three: you can now talk about it with your 15-year-old nephew at the family BBQ.
So, before we jump into why marketers should care, we need to ask:
What is the Ethereum Merge?
The Ethereum Merge is a long time coming.
In basic terms, it's a network upgrade that will change the coin's current consensus mechanism from "proof of work" to "proof of stake". This'll help Ethereum deliver on its plan of becoming more scalable, secure, and sustainable.
A consensus mechanism is a system that cryptocurrencies use to validate the authenticity of transactions and maintain the security of the underlying blockchain.
The Merge is a long-awaited change to the system, moving it from the inefficient proof of work to a more efficient proof of stake setup. Both of these are ways to operate the blockchain system that managed and tracks every transaction in the cryptocurrency. But what's the difference?
- Proof of work: The currency relies on "miners" to mine crypto coins, through the completion of complex mathematical calculations using energy-intensive graphics cards.
In this system, rewards are randomly assigned to a computer in the distributed computer network managing the currency's blockchain. Miners are therefore incentivised to have more "nodes" to increase their odds of getting the reward. - Proof of stake: The currency requires the owners of the coin, i.e. the stakeholders, to validate transactions. Then, the stakeholders earn rewards for doing so. This also means that those with the most cryptocurrency get the most rewards.
So, why is this all happening?
Well, advocates of the Merge say that it will allow the Ethereum network to reduce its energy consumption by around 99%. Pretty darn good.
The "proof of work" model used by Bitcoin requires far more energy than the "proof of stake" model. Considering the negative impact on the environment is one of the biggest criticisms that we see from crypto-naysayers, it has been on the minds of many proponents of the industry. So, Ethereum's shift to the less energy-intensive model is a significant advantage for the coin.
On top of this, the Merge will set the groundwork for other aspects of the network's forward planning, like making transactions more efficient.
What Does the Ethereum Merge Mean for You?
Well, good news. If you hold crypto assets, there likely isn't any action you need to take. But the Merge offers you an environmentally-friendly option for you, or anyone interested in crypto.
If you're a socially conscious investor who is feeling hesitant about the environmental impact of crypto, this could be very good news for you.
“There is a lot at stake for this new event," says Eliézer Ndinga, director of research at 21Shares, which provides cryptocurrency exchange-traded products.
He described the Merge as "a huge step forward, especially for the retail investors more conscious about global warming and climate change" who want to invest in more environmentally-friendly assets.
Crypto can play a lot of roles within marketing, and with The Merge possibly having an effect on crypto prices, then it's an important shift you'll need to keep your beady marketing eyes on.
Companies are harnessing blockchain technology and cryptocurrency to improve their marketing efforts, dabbling in such fields as:
- Payment: Both blockchain and crypto have a significant impact on how we make purchases. The rise in crypto, crypto credit cards, stablecoins, and even online retail payments, means marketers have to be aware of how cryptocurrency can work within their company, as digital currencies have the potential to eliminate cash altogether.
- Analytics: Using a blockchain decentralised ecosystem to gather and analyse data is a system which provides accuracy, security, and consistency.
- Content: Blockchain may change how content is stored and distributed. A decentralised ledger could be a useful solution for Copywrite protection. This provides consumers with more freedom in how they purchase and consume content.
- Social Media: Meta is working on its own crypto coin for the metaverse, called Diem coin. It acts as an NFT so users can exchange, purchase, and withdraw securely in the virtual world, so it is likely that social media will adopt cryptocurrency as a norm.
- Creator Coins: With Creator Coins, influencers will be able to craft their own type of cryptocurrency, with which they can build fan engagement. A creator and their community own any value built up in their insular economy. There is non of the 'big 3' online creator fears, which are demonetisation, censorship, and de-platforming.
- Advertising: Businesses can skip the big social media sites and interact with consumers directly, and share the reward of ad exposure with them.
What Are The Possible Issues Surrounding the Merge?
Ethereum was recently reported to be at the risk of a huge setback just days before it underwent the most significant upgrade in its history.
The cloud storage provider Hetzner, which hosts 15% of Ethereum's nodes, warned that mining and staking are in fact against its terms of service.
Based in Germany, Hetzner is the second-most popular cloud services provider for Ethereum miners at present, while Amazon Web Services has a 55% market share.
In an official statement on Reddit, the company warned:
"Using our products for any application related to mining, even remotely related, is not permitted. This includes Ethereum. It includes Proof-of-Stake and Proof-of-Work and related applications. It includes trading."
It has also been questioned whether Robinhood will support a new crypto asset. On their site, the crypto broker said:
"If an ETH proof-of-work (ETHPoW) fork occurs after the Merge, we will review it with the same rigorous evaluation process that we use for any crypto asset listed on Robinhood Crypto. We will continue to inform you about any changes related to the Ethereum Merge event."