- The ethereum blockchain is set for a “merge” in September 2022.
- The price of ethereum has surged in anticipation.
- Brian Mossoff, CEO of Ether Capital, explained why the “merge” is seminal for ethereum’s future.
Ether has been on a bull run these past few weeks in anticipation of the ethereum blockchain’s forthcoming merge on September 19.
Insider spoke with Ether Capital CEO Brian Mossoff about the merger, and the three reasons why he believes it will continue to bolster the price of ether well into the future.
Ethereum’s merge — aka ethereum 2.0
The merge is the term used by the crypto community for ethereum’s blockchain transitioning from proof-of-work to proof-of-stake, an evolution that is significant for two reasons.
First, proof-of-stake is much more environmentally friendly than ethereum’s present verification system, proof-of-work. One of the major criticisms of cryptocurrency — and specifically proof-of-work — is the environmental damage it can do. Elon Musk cited proof-of-work — a process which uses more energy than all of Argentina — as the reason why Tesla stopped accepting bitcoin.
Even Anatoly Yakovenko — founder of ethereum competitor solana — is excited about ethereum switching to proof-of-stake.
“It’s awesome that they’re moving towards proof of stake, because I think proof of work is taking way more energy just to provide security for the chain than anybody ever needs,” Yakovenko recently told Insider. “It is just so energy intense that as an engineer it hurts me, hurts my soul to see proof-of-work run.”
Second, ethereum’s update is considered a precursor to the surge, in which ethereum’s scalability issues will be addressed.
One of the biggest criticisms of the ethereum network is that it’s far behind competitors when it comes to how many transactions per second (TPS) it can process. Ethereum has a TPS of 15, which is miles behind competitors like cardano, which has a TPS of 250, and solana, which has a TPS of 65,000.
Ethereum founder Vitalik Buterin told a conference in Paris that ethereum’s network would be able to process 100,000 TPS following the surge. But first, ethereum has to complete its merge.
3 reasons why ethereum’s price could increase
Brian Mosoff is the founder of Ether Capital and a decade-long veteran of the crypto industry.
Ether Capital is a Toronto-based technology company, and is one of the largest institutional holders of ether. Beyond Ether Capital, Mossoff has served as an advisor to both the Ontario Securities Commission and the Investment Industry Regulatory Organization of Canada.
In a recent interview with Insider, Mosoff shared three reasons why he believes that the ethereum merge will send the price of ether even higher than where it stands today.
Proof of work gets put to rest
Proof-of-work narratives have long been debilitating for the cryptocurrency industry.
Shortly after Elon Musk cited energy consumption as a reason for stopping bitcoin payments for Tesla, the cryptocurrency crashed. Right now, legislators — like New York’s Governor Kathy Hochul — are considering ways to ban crypto mining companies that uses carbon-based fuel in their operations. Environmental concerns are a clear and present danger to the future of the crypto economy, and by switching to a less energy-intensive method of validating blockchain transactions, ethereum will position itself as a better option for investors and institutions alike.
Mossoff shared his thoughts on the transition. “We’re switching to something that is 99%-plus more energy efficient, and these financial institutions and asset managers that have ESG (environmental, social, and governance) mandates internally are all of a sudden going to go: ‘hey, this thing checks the box for us.'”
Mossoff believes that institutional investors know that ethereum’s transactions “dwarf” their competitors — specifically citing the website cryptofees.info, which shows how much more money is spent on transactions that occur on any given blockchain — and would be keen to invest if it weren’ t for environmental costs.
Institutional capital wants to stake in ethereum
Mossoff also believes that the merge will lead to institutional investors pouring money into ethereum
“There’s a lot of capital that’s sitting on the sidelines — that’s debating: ‘do I buy eth and stake it?’ — that has been waiting for the merge and waiting for proof-of-stake literally since 2016,” Mossoff said.
Mosoff is alluding to the fact that many institutional investors would be interested in staking — or taking their ether out of general circulation and giving it to the ethereum network to hold on to — and in return becoming validators in the proof-of-stake system.
As a reward for staking their crypto, validators receive new ether. Ethereum’s official website says that validators can expect to earn 4.2% APR from the ethereum foundation for staking their ether — a solid return on their investment.
It is worth noting that this is the root of concern for proof-of-work advocates like Strike’s Jack Mallers, who told Insider that having large investors become validators of new blocks in a cryptocurrency network goes against the ideology behind blockchain and cryptocurrency.
For Mossoff, however, the choice is clear: if you believe in the ethereum ecosystem’s future, you will want to stake your crypto.
“Anyone who is long the asset, long ethereum, I can’t see why they wouldn’t go out, build a position, and then stake it,” Mossoff said.
Competitors want to lose to ethereum’s layer-2 solutions
The final reason Mossoff is bullish about the ethereum merge is that it will be a huge blow to projects that have branded themselves as “ethereum killers.”
Mossoff believes that once ethereum proves itself as a proof-of-stake network — thus lowering its cost of creation and energy use — the selling points of ethereum competitors will fall flat.
“I think it’s going to be much harder to maintain interest in competing layer-1s during this bear market as eth now moves towards the merge and scaling and layer-2s,” Mossoff said.
Some ethereum layer-2 solutions include polygon and arbitum, both of which aim to lower ethereum’s costly gas fees while boosting the scale of transactions that the ethereum network can handle.
Mossoff specifically called out projects like EOS, basic attention token, solana, and tezos — all of which have the key elements of ethereum’s ecosystem, like smart contracts, DeFi, and NFTs, but conduct blockchain activity more effectively than ethereum at the moment.
“It’s literally the same narrative. ‘It’s faster, there’s a higher supply.’ This is the same thing that people were saying in 2019 and 2020,” Mossoff said.
He continued: “Are those going to be “the” assets in 2025? My experience has been: probably not. But, I would bet that bitcoin and eth will remain number one and number two by market cap for the next five years.”