Independent crypto researcher Kyle McDonald explained last Friday (September 2) why Bitcoin could get even more attention from regulators — due to its high energy consumption — after Ethereum’s Merge upgrade has been completed.
Here is how Ethereum Foundation explains the Merge, which marks the Ethereum network’s transition from Proof-of-Work (PoW) to Proof-of-Stake (Pos) consensus:
“The Merge represents the joining of the existing execution layer of Ethereum (the Mainnet we use today) with its new proof-of-stake consensus layer, the Beacon Chain. It eliminates the need for energy-intensive mining and instead secures the network using staked ETH. A truly exciting step in realizing the Ethereum vision – more scalability, security, and sustainability.
“It’s important to remember that initially, the Beacon Chain shipped separately from Mainnet. Ethereum Mainnet – with all it’s accounts, balances, smart contracts, and blockchain state – continues to be secured by proof-of-work, even while the Beacon Chain runs in parallel using proof-of-stake. The approaching Merge is when these two systems finally come together, and proof-of-work is replaced permanently by proof-of-stake.
“Let’s consider an analogy. Imagine Ethereum is a spaceship that isn’t quite ready for an interstellar voyage. With the Beacon Chain, the community has built a new engine and a hardened hull. After significant testing, it’s almost time to hot-swap the new engine for the old mid-flight. This will merge the new, more efficient engine into the existing ship, ready to put in some serious lightyears and take on the universe.“
According to a report by CoinDesk published last Friday (September 2), McDonald thinks it is better to sell Bitcoin now because the Bitcoin price may crash if it gets banned by regulators.
And the reason McDonald is worried about Bitcoin getting Bitcoin after the Merge is that Ethereum’s switch to the much more energy-efficient PoS consensus might make regulators think that maybe PoW was never essential.
The report says that he told CoinDesk TV’s “First Mover” program that the climate cris, Bitcoin mining’s huge energy consumption, and lack of any evidence that Bitcoin is highly unlikely to switch to the more environment-friendly PoS consensus could put pressure on regulators to ban Bitcoin, and that in fact Bitcoin could become the first cryptocurrency “to be regulated away” (at least in certain jurisdictions, such as the U.S. or the European Union).
McDonald also mentioned that he believes Ethereum Foundation’s claim about the Merge reducing Ethereum’s energy consumption by 99.95%:
“When you’re moving from a system that is about generating as many random numbers as fast as possible with 10 million [graphic processing units] across the world, to a system that’s running on a few thousand computers that are pretty low energy, it’s going to make a huge difference.“
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