The Ethereum Merge date is finally approaching. What happens next?

  • Between September 15th-16th, the second largest cryptocurrency, Ethereum, will transition from proof-of-work to a proof-of-stake consensus model commonly referred to as ETH 2.0
  • The miners in favor of forking appear to have agreed on a set of tenets. Most notably, undoing the fee-burning mechanism in the current protocol
  • Miners against the fork will presumably look to generate revenue by mining other proof-of-work coins

Our thoughts: Ethereum’s merge will be the end of a paradigm for altcoin miners. There may not be enough revenue across the smaller coins to compensate for what miners were collectively earning on Ethereum. Since there won’t be a “good” alternative, a large portion of altcoin miners could eventually fade away since they cannot be repurposed to Bitcoin’s algorithm.

What about Bitcoin?

  • Bitcoin and Ethereum are two completely separate blockchains, so the transition to ETH 2.0 will not affect the technology or miners that maintain the Bitcoin network
  • The U.S. Government recently forced some Ethereum services to censor certain transactions. In response, parts of the Ethereum community are considering to collaboratively “slash” the ETH held by exchanges that comply with censorship made possible by proof-of-stake
  • If users store any currency, including Bitcoin, with such exchanges, there is a risk that their funds could be lost. If an exchange loses a significant part of its balance sheet to slashing, it could result in a bank-run style withdrawal event, leading to possible insolvency

Our thoughts: While there are no guarantees that the merge will result in unexpected losses of funds on other exchanges, it is important (and easy) to protect your Bitcoin through self-custody, or with Bitcoin financial institutions that don’t participate in Ethereum, like River.

Enter: Samsung

  • Seven companies in South Korea, including Samsung Securities (a subsidiary of Samsung), have plans to get involved in Bitcoin
  • Samsung is exploring ways to become a part of the Bitcoin ecosystem, which could include integration of Bitcoin with Samsung phones
  • President Yoon Suk-yeol’s recent electoral victory is claimed to contribute to the increase in institutional interest in Bitcoin, as he pledged to deregulate the industry during his campaign

Our thoughts: Samsung’s interest in becoming part of the Bitcoin ecosystem will be an interesting development as time progresses. Depending on how heavily they choose to embrace Bitcoin, it could put pressure on Apple to follow a similar trajectory. Something to keep a watchful eye on.