Ethereum's transition from the network's proof of work model to proof of stake — also known as The Merge — is scheduled to take place on September 14th. This represents a crucial milestone for the digital asset sector's most widely used blockchain and its cryptocurrency, Ether. The upgrade is a technological feat that will cause Ethereum's energy consumption to plummet, with proponents believing it will bolster Ethereum's long-term prospects. Michael Rosmer, Co-founder of DeFiYield, talks about the significance of the Merge and what it means for developers on the network. 

Opening Bell

What to Expect From the Ethereum Merge

and here to discuss more is Michael Rose Merck, co founder of defi yield. Thank you so much for joining us. I'm wondering if you can just break down the significance of this merge? Well, it's the single biggest event, I would say in kind of crypto technological transition, you had Bitcoin, then you had ethereum come out back in like 2015 and now you've got this very major change which has been planned for years. It's really technically challenging and they've spent a lot of time working on it and it sets to set it up so that ethereum can be able to scale much better, which is going to allow a lot more applications to be built on it, a lot more users to use it and to do that in the process also reduce the costs of people using this, paying for security. So in other words, block chains are fundamentally a security mechanism and so the cost in terms of power cost right now is very, very high, but they're going to be reducing that a lot by changing to this proof of stake rather than proof of work. That's gonna be a big deal. And then the last part that's really important is to pay for the security of any network. You have an inflation mechanism which is built in there. In other words, new coins are minted on Bitcoin, This decreases every four years on ethereum, it's potentially going to go negative and so this could potentially be a big boost in the price. We'll see whether that happens or not, but it could be okay, lots of things to look at here from what you've just said. More applications, more users being able to access this and also reducing the cost as you had mentioned, can you talk a little bit about how this will bring down the gas fees of the ethereum network. So I wouldn't expect the gas fees to come down much initially over time. What it's gonna do is it's going to allow them to scale up the throughput of the network and the reason for this is normally when you have a network like this, basically the amount of energy burned per block of transactions is the amount of security you get. And because that's a function of time, if we have more time being spent then we can have more security. But that means that you can only pack so many transactions in there with proof of stake. You don't have this problem because the amount of stake is the same no matter whether it's a small amount of time or a large amount of time. So over some of the future transitions which going to take place over the next six months, year or two years, what that will mean is they're able to scale it up quite a bit. And so we would expect transaction costs to go down quite a bit, transaction speed probably can increase and the number of transactions that can go through can improve, which all helps to get a better user experience and that of course helps to onboard new users. Okay. And Michael, so those are some of the aspects that users can look out for when it comes to crypto trading. What does this merge mean for developers on the network? For developers? I mean, the first thing is they're going to be in a situation where potentially uh they're gonna benefit down the road from a better user experience, which means it's more advantageous for them to build on this network as opposed to some others. You were just talking on the previous story about how Starbucks is building on polygon, polygon is already a proof of stake network. And so this is kind of bringing theory and up to the level of these other networks and it's ideally a much better system for people to build on because it's a more secure system, it's a more decentralized system and there's more users and there's more value there. So very often it's the preference of developers to build on ethereum because of the fact that that's already where the users are, that's already where the value is, but they've been hamstring by the fact that it's been expensive and it has been slow relative to these other alternatives. And so bringing a theory, um up to that level could be really good for not requiring that developers go to other places. But this is all, you know, speculative because everybody else is going to work on improving as well as we go along. The merch is going to cut the network's energy usage by 99%. How do you think this is going to affect energy standards within the broader crypto ecosystem? It's been one of the, I would say achilles heels whenever we talk about crypto and mainstream adoption moving forward because of the focus on sustainability and the environment. Yeah, clearly there's a big focus amongst institutions on kind of the E S G narrative. Right. And so ethereum was not going in the right direction in that regard in order to gain broad institutional adoptions as a concern for Bitcoin, some people, there's trade offs of each system, so, you know, it's not one size fits all or just one directional play but that being said, I think this is going to open up the doors for a lot more institutional adoption and again that benefits the whole ecosystem, that means more developers, that means more capital, that means more projects, that means more users. And so I think in the net if it works out well and it should, they've done a lot of testing, then this is gonna be really good for the whole space as a whole. Yeah, as you said, the single biggest event in the crypto technical transition, we're waiting to see how it all works out. That's Michael Rose mur co founder of defi yield, appreciate that insight today