Ethereum’s Merge Finally Occurs, But What Happens Now?

On Thursday morning at approximately 06:40 UTC, Ethereums highly anticipated Merge to PoS (Proof-of-Stake) was completed. The new system invites validators to stake 32 ETH with the platform, granting them access to the Ethereum ledger along with the ability to confirm and write transactions. However, because of the high capital requirement, as well as the technical difficulty associated with setting up a validator system, only a select number of people can become validators on their own.

Important details

More than 40% of the networks blocks were added by only two companies following Ethereums Merge event last week, namely Coinbase and Lido.  Developers framed the switch Proof-of-Work to PoS as a way to combat centralization on the second biggest blockchain network by making it more difficult for individual entities to interfere with the Ethereum ledger. However, there were signs of network consolidation early on which have since raised concerns that those expectations may not be realized in the way that everyone was hoping.

Nevertheless, ETH has flowed to services provided by Coinbase, Lido, and other staking pools that make it simple for users to become validators and earn rewards for doing so. Despite this, concerns have been raised as a result of so much money going to so few services, as should a single entity own over 66% of the networks staked Ether, it can make it increasingly difficult for others to successfully write transactions to Ethereums ledger.

More than meets the eye?

Although the Ethereum Merge is a truly historic event that will be discussed and revisited for a long time to come and will reportedly cast aside miners who were previously the key driving force behind the blockchain in exchange for the more environmentally-friendly PoS system, concerns about validator centralization have been steadily increasing since August, when sanctions imposed by the United States government involved validators being forced to censor transactions coming specific blockchain addresses.

Some, but not all, validators in the country have hence announced that they shall start ignoring transactions the Tornado Cash mixer program, thereby preventing any chances for those transactions to come onto Ethereums decentralized ledger.  SmartFi Executive Chris Terry stated that this is essentially consolidation which in this context is just another term for centralization. This is extremely dangerous as it grants more control to the government and other intermediaries. Without a doubt, he continued, the Ethereum blockchain will witness plenty of transaction censorship now on.

Additionally, concerns about Ethereum becoming more centralized have resulted in a number of comparisons regarding the new PoS system to the types of centralized fiat currencies which blockchains were designed to avoid in the first place. Max Gagliardi, Ancova Co-Founder, said that ETH is now solely created digitally by guidelines and parameters laid by its central planners. Whatever the case may be, all eyes are fixed on Ethereum as the world&rsquos second largest crypto by market capitalization looks to convince everyone that the move to PoS was indeed worth it.