Ethereum is one step closer to its long-awaited software transition, the so-called “merge,” after the quiet completion of its second to last 'dress rehearsal' on Wednesday.
The Wednesday test in question, dubbed Sepolia by Ethereum core developers, hinged on a more complicated blockchain form of voting that involved validators across the network needing to accept software changes in a coordinated fashion.
After completing this test, the first block of transactions on the test chain received a more than 94% acceptance rate.
“That’s an extremely good sign,” said Superphiz, an active Ethereum community manager on a developer call streamed over YouTube. “I would consider this, for all instances and purposes, a flawless merge."
For reference, an upgrade needs at least a 66% acceptance rate to pass as a majority approval. While a 94% acceptance rate isn’t perfect — the mishap appears to have been a temporary software bug — that level of performance would suffice for the actual merge slated in the upcoming months.
While there is no exact date for the merge, the upgrade is expected to begin sometime between August and October.
Why Ethereum’s merge matters for investors
Discussed as far back as 2014, the yet-to-be scheduled merge officially transitions Ethereum from using proof-of-work to proof-of-stake.
Though different camps of crypto enthusiasts have different arguments for why certain methods work better than others in running a public blockchain, Ethereum developers such as co-founder Vitalik Buterin argue that a successful merge to proof-of-stake is the blockchain’s only option for future success.
The upgrade is projected to have cascading effects on the crypto industry. More immediately, the move will make Ethereum greener — reducing its energy consumption by 99%, according to Ethereum.org.
Additionally, the proof-of-stake model is projected to cut the supply issuance of ether by as much as 90%, which has led some investors to speculate on it having a positive impact on ether’s price.
While Wednesday’s test merge is a milestone for Ethereum, most of the excitement is muted given “lingering pessimism across the broader crypto market,” according to Michael Safai, a partner with crypto trading firm Dexterity Capital.
Following tightened monetary policy by central banks around the world, the crypto market has experienced a crisis related to ready liquidity and several blowups of notable companies.
The total crypto market capitalization has shrunk from more than $2.1 trillion at the beginning of 2022 to about $909 billion as of Wednesday afternoon, according to Coinmarketcap.
Ether changed hands at $1,139 hours after the merge completed and traded at $1,181 as of Thursday morning. The coin remains down nearly 65% in 2022.
“When this merge finally happens, we’ll see some tangible energy from investors — but it's probably going to be exponentially smaller than it would have been if the market was still roaring,” Safai said.
David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.