What could Ethereum’s merge mean for the metaverse?

Ethereum’s ‘The Merge’ upgrade, part of a multi-step process, created a significant reduction in energy consumption. This is great news for the planet but what further potential could it herald in other worlds such as the metaverse? Read on to find out more.

14 October 2022
Hadean Team

On the 15th September Ethereum launched a major upgrade called The Merge which joined its Mainnet to the Beacon Chain. But what does this conversion of mechanisms from mining and proof-of-work (PoW) as a process for producing blocks to proof-of-stake (PoS) consensus indicate for the future of the metaverse?

Right now we are still feeling the chills of the crypto winter and many are waiting for the thaw before making any big moves towards further investment, if they choose to invest at all. 

Not too long ago, Ethereum successfully managed to convert from PoW to PoS, the biggest story that their PR machine pushed out about this highly impressive upgrade was the sustainability benefits of the changeover. This is, of course, great news because using PoS is now more akin to the same amount of energy used to run an application on your laptop rather than what was necessary to power up the entirety of Norway. Whilst this might encourage detractors who were previously concerned about the climate impact of cryptocurrency mining, we find that there is far more to The Merge that points towards a future filled with potential and opportunity for the blockchain, decentralised applications and the metaverse as a whole. 

The Merge itself was a feat of Herculean proportions, and we are not taking this away from the small army of developers that were all a part of accomplishing it, but a major crux of it was the need to create a system that could meet the increasing demands for faster transaction processing speeds, or scalability demands, if you will. The previous proof-of-work mining process takes too long and could not meet the criteria for true scalability. Proof-of-stake can better align with scaling solutions. 

So how does PoS work? 

PoS uses a consensus mechanism that only allows validators who have staked ETH via smart contracts on the Ethereum blockchain to participate in the system. Validators, rather than miners, are arbitrarily assigned to create new blocks that they then share with the network to be approved by fellow validators. They earn rewards upon forging new blocks which incentivises honest behaviour while dishonest behaviour is penalised as the validators’ ETH, which acts as collateral, is at risk. As the mechanism does not require the heavy computational power of proof-of-work it is much less energy intensive. 

Where does scalability come into it?

The Merge is a step within a multi-upgrade process. The next stage through which Ethereum is looking at offering a scaling solution is called The Surge and will look to implement sharding. What sharding does is to reduce the computational strain on the main network by breaking the blockchain up into smaller, independent yet inter-communicable data storing shards. When combined, all the shards in the blockchain form one logical dataset. Through the use of sharding, network latency can be vastly improved meaning better transaction processing speed and scalability. 

The more detailed intricacies of the PoS mechanism and sharding can be gleaned from Ethereum’s site but crucially what we are looking at is the removal of a huge barrier to adoption. We can all appreciate that the blockchain is a key element in enabling the evolution of Web 3.0 which in turn creates the pathway to birthing an open and decentralised metaverse, however for the metaverse to function effectively and provide value, the networks or platforms providing the cryptocurrencies that will mobilise its economy must be able to scale. 

With PoW, high numbers of transactions congest the network, resulting in delayed confirmation times, to add further insult to injury they also incur additional transaction fees. This isn’t a particularly appealing set up when one is looking at setting up a viable commercial enterprise within the metaverse. Ethereum’s plans to utilise sharding will do away with this, enabling scalability, and sets their blockchain network up for meeting the requirements of a viable, decentralised and accessible infrastructure for a truly open metaverse. 

Additional benefits that come with the upgrade include increased security as there is no longer the risk of miners amassing a majority of the hashrate (the measure of computing power aggregated by all miners) and performing a 51% attack which would prevent anyone else from updating the ledger. PoS also offers a fairer and participatory system which removes the domination of larger miners, the requirement to participate as a validator is just 32 ETH. 

What could the future hold?

For Hadean, we are also looking on the other side of the cryptocoin, so to speak. We have set up the infrastructure that reduces the limitations for creators, enabling them to build, unhindered, within the metaverse and grow their enterprises. This, in turn, brings incredible value to cryptocurrencies as the virtual worlds run on platforms that are exclusively dedicated to their use for trade. 

Ethereum is viewed as the crypto industry’s main conduit for the flow of currency, it will potentially play a big role in facilitating monetisation within the metaverse and so this first step in their upgrading programme is worth paying attention to, especially when it aligns with our mission to build, run and monetise the Metaverse.

There is an area of symbiosis, plus mutual benefit here and underlining both is the issue of scalability. 

If The Merge, PoS and sharding prove to be successful in creating an effective, and ecologically sound solution to scalability as well as providing decentralised and fairer means of cryptocurrency production then it really is great news for creators trying to build within the metaverse, those looking to invest in it and, of course, our planet.