Ethereum price up 70% in 30 days, Vitalik Buterin says 'the Merge is coming,' talks post-upgrade benefits
(Kitco News) Ethereum co-founder Vitalik Buterin praised the benefits the Merge would bring, including significantly lower transaction fees and a number of key upgrades.
"The Merge is coming. This effort we have been working on for the last eight years," Buterin told the crowd of avid crypto investors and developers at the Blockchain Futurist Conference held in Toronto this week.
The news around Ethereum's Merge, which is likely to take place on September 19, has been driving the crypto rally in the late-summer period. Ether (ETH) price rose 70% in the last 30 days. And the world's second-largest cryptocurrency traded near two-month highs on Thursday, climbing above the $1,900 level.
The Merge would see Ethereum transition to the more energy-efficient proof-of-stake consensus mechanism from the energy-intensive proof-of-work model, which Bitcoin also uses. To read more about the Merge, click here.
According to Buterin, the first thing that Ethereum users will feel is the cryptocurrency's energy consumption dropping by more than 99.9%. The second thing would be much lower transaction fees.
"I know inflation is at 8.5%, gas prices are going up. But here, gas prices are going down," he said Wednesday. "Low transaction fees are the only thing that can make blockchains affordable to anyone."
Post-Merge, Ethereum's transaction fee could be as low as $0.002, Buterin said on Wednesday. This is key when looking at the median daily incomes across the globe.
"The median income per day in Canada is about USD$113. In Poland, the median income per day is USD$42. In Mongolia, it goes down to USD$16, and in Zambia [it is] USD$4. Very big differences," Buterin pointed out. "The average transaction fees on Ethereum for the last couple of years … have been somewhere between $1-$20."
Buterin also warned that if a new bull cycle commences, it will push transaction costs much higher. "If we see one of these bull cycles pop up again anytime soon, the fees are going go crazy again," he said.
But even a $5 gas fee in Ethereum is much too high for some countries. "And if we're talking about blockchains being this global thing that's supposed to empower people who are not empowered today in underprivileged countries, then you can see how it starts looking less viable," Buterin explained.
This is one of the critical things that the Merge can fix. "Today, with rollups, it's already sometimes 25 cents, sometimes less than 25 cents. And if you analyze what's going to happen as a result of the improvements, then we're talking about potential fees of maybe $0.05 cents, or maybe even as low as $0.002," Buterin said. "Massively cheaper transactions to the point where on-chain transactions will become affordable for lots of people for whom they're not affordable today."
.@VitalikButerin talks upcoming Merge: while gas prices are going up in the US and #inflation is at 8.5%, #Ethereum’s gas fees are going down #Futurist22 @Futurist_conf #crypto pic.twitter.com/XBCqliH70h— Kitco Crypto (@KitcoCrypto) August 10, 2022
Buterin's keynote focused on the many opportunities the Merge opens for Ethereum, including an array of new upgrades and projects.
"At the same time as being a switch from proof-of-work to proof-of-stake, it's also an opportunity to take some of the ideas we've learned over the last eight years and use that to redesign the different parts of the Ethereum chain," he said.
One idea Buterin highlighted is to bring back crypto payments as a trend via lower energy and lower transaction fees. "In 2013, there was this big social movement where people were really excited about trying to get an in-person Bitcoin economy happening. But fast forward a few years later, people have mostly stopped talking about these things."
The issue is high fees. Back in 2013, Bitcoin's argument was low fees in comparison to PayPal or Visa. "Since then, that argument has just become completely false. [But] now, if blockchains can scale, then guess what? The argument becomes true again," he said. "If we have much more scalable blockchains, can we bring back crypto payments? It is something that is going to be worth trying."
Another future development Buterin is excited about is a project called sign-in with Ethereum, where people can use their Ethereum wallets to sign into web services. "It's basically like a Telegram clone, except you don't have to give your phone number to use it," he said.
Social recovery is another Web3 concept that Buterin is excited about. "You can say I'm going to have five recovery contacts. Two of them are going to be an institution. One of them can be my employer. One of them can be my dad. One of them can be a friend. And any three of those five can come together and recover your accounts and reset your key to something else. And this is something that you can put into the rules on a smart contract, put that on-chain," he described.
Hype around NFTs
Ethereum's co-founder also criticized some of the hype surrounding NFTs, noting that back in the 1990s, there was a big idealistic effort to try to create an ecosystem where everyone would have their own cryptographic key.
"In the 1990s, you had these deep and philosophical arguments about this great fundamental battle between the authority of the nation-state and the desire for individual freedom. Fast forward 20 years, and it is: 'hey, look, it's a monkey!'"
This is the double-edged sword in crypto, according to Buterin. The pre-crypto space was an idealistic decentralized tech movement with not enough incentives. And the crypto space of today is filled with great incentives, but "it has incentives that like go in very weird directions sometimes," he pointed out.
Buterin also spoke at length about scalability and more complex concepts like proto-danksharding and danksharding, which can increase the amount of data that the Ethereum chain can hold. Buterin sees the numbers go to around 16 megabytes, from the average data block holdings only about 80 kilobytes.
"We're talking about Ethereum over the next couple of years being able to process a much larger amount of transactions than it has been able to before," Buterin said.
Post-Merge, Buterin envisions the Ethereum identity ecosystem really growing. "To me, this is probably like the best candidate for sort of Ethereum's second major app aside from the DeFi ecosystem," Buterin highlighted.