Ethereum Merge: Why should I care about the biggest thing happening in crypto?

Sascha: [00:00:02] From Equity Mates media. This is the dive. I'm your host, Sascha Kelly. One of the biggest events in cryptocurrencies short history is happening this week. These theories emerge now here the dive. We're certainly not crypto experts. I guess you could say we're more interested. Observers swear crypto curious, but there is so much hype around this March. It's Wednesday, the 14th of September. And today I want to know what is happening with the Ethereum merge and why does it matter for those of us not deep in the world of cryptocurrency to do this today, I'm joined by my colleague, the co-founder of Equity Mates and a fellow crypto curious enthusiast. It's Alec, Renehan. Alec, welcome to the dive. 

Alec: [00:00:51] Hey, Sascha. Yeah, big story today. Not one we're technically across, but, you know, the hype is real when Google puts a countdown timer on their website. So it's big. Let's try to unpack it yet. 

Sascha: [00:01:04] Google has their finger on the pulse of what's happening in anything, pop culture, news, whatever it might be. If they've got a little widget for it, you know, it's big news. 

Alec: [00:01:14] That's the kind of insights you come to the dive for. Google has its finger on the pulse.

Sascha: [00:01:20] Now, Alec, to help us unpack the story today, we're going to be joined by Tracey Plowman, who's the co-host of the Crypto Curious Podcast and the CEO at Micro Investing App Bamboo. But before we get to the interview, set the scene for me. What is Ethereum? 

Audio clip: [00:01:37] The Ethereum network set to undergo a major upgrade this month. The merge will greatly reduce the Ethereum's energy consumption. 

Sascha: [00:01:44] Stream is the second largest cryptocurrency by market capitalisation is around. 

Audio clip: [00:01:49] 200 billion just behind Bitcoin. 

Audio clip: [00:01:51] And if you understand the way that blockchain networks work, the key thing that they're doing is. 

Alec: [00:01:55] Keeping your data secure. Yeah. Now, Ethereum is the world's second largest blockchain, and it has the cryptocurrency Aether. Now, Sascha Aether is worth $200 billion, and it was worth a lot more at the start of the year. But cryptocurrencies have had a tough year now to put $200 billion in context. Australia's biggest bank, Commonwealth Bank, is worth about 112 billion USD. MasterCard is worth about 300 billion USD and giant investment bank Jp morgan is worth about $340 billion. So Ethereum at $200 Billion puts it right up there. In terms of the world's biggest financial institutions, most people have heard of Bitcoin. Bitcoin is often called digital gold. It's designed to be a store of value and a way to move money effortlessly around the world. Ethereum is a little bit different to Bitcoin. Ethereum is designed to be a blockchain the programmers can build on top of. You may have heard of nfts those digital artworks or decentralised finance sometimes called defi or web3. This some of the applications that are being built on top of a theory. Basically the idea is in the future, everything we use currently on the internet will have an equivalent built on the Ethereum blockchain instead. 

Sascha: [00:03:21] As I said in the introduction, we're not in the world of crypto, so why is this merge interesting for Non-Crypto people? [00:03:28][6.3]

Alec: [00:03:28] Well, that's our big challenge today, Sascha, to make it interesting and to make it understandable. I guess it's interesting and relevant for people not in the world of crypto not investing in cryptocurrency because the plan for Ethereum, the vision for a Ethereum is for it to take over so many real world applications from finance to browsing the web, gaming, advertising, managing your identity online, even managing complex global supply chains. There are companies working on solutions to these problems or trying to better what we currently have now using the decentralised blockchain and the smart contracts that Ethereum enable. But the biggest reason we should all be interested in this story is the environmental one, because one of the biggest criticisms of cryptocurrency today is energy usage. Today Ethereum uses about 112 terawatt hours of electricity a year. Now, to put that in context, that's about the amount of energy that the Netherlands uses a year ethereum's total carbon emissions is the equivalent of Singapore's, and that's just a theory, and that's just one cryptocurrency. Bitcoin, the world's biggest cryptocurrency is estimated to use as much electricity as Argentina, population 45 million. So if cryptocurrency is going to reach mainstream adoption, it's going to have to address this energy challenge because in this context of concern about climate change. And trying to reduce energy usage. We're never going to say widespread mass adoption of cryptocurrency when it's using so much electricity. So supporters of Ethereum say this merge is the answer to that challenge. And we're going to try and unpack it today. [00:05:14][106.2]

Sascha: [00:05:15] Great context for me there. Alec, I feel ready to dive into the interview now. So let's go hear your interview with Tracey. And one last thing to keep in mind. Tracey speaks about Vitalik. That is Vitalik Buterin, the Canadian programmer that came up with Ethereum back in 2013. [00:05:33][18.2]

Alec: [00:05:36] So I'm joined by Tracey Plowman. Tracey, welcome to The Dive. [00:05:39][3.0]

Tracey Plowman: [00:05:39] Thanks for having me. Excited to be here. [00:05:41][1.4]

Alec: [00:05:41] Now, Tracey is the chief operations officer at Cryptocurrency Micro Investing app Bamboo and the co-host of the podcast Crypto Curious. And Tracey, we've got you here because you are our expert here at Equity Mates on all things cryptocurrency. We're talking about the Ethereum merge today. Before we get into the details, I want to start here. Why should I care about the Ethereum? [00:06:04][23.3]

Tracey Plowman: [00:06:07] Oh, look, it's it's the most hotly talked about topic in crypto world right now. And look, I've been in the crypto space for five years now, and I've seen a lot of things and I'm probably I'm not exactly Yoda level, but maybe Obi-Wan Kenobi. And this this merge is the most widely anticipated biggest event in crypto that I've ever heard of. So, you know, you're actually talking about something that's never been done before. And, and Ethereum is is kind of a big deal. So you may have heard people say things like it's aiming to be the world computer, which it is a decentralised world computer. It's a grand task, but they're on the way to doing it. It's pretty important. So we do need to take note of this merge. [00:06:52][44.9]

Audio clip: [00:06:52] The merge is a process where the Ethereum network is going to move from proof of work, which is very energy intensive to proof of stake. [00:07:01][8.3]

Audio clip: [00:07:01] But proof of stake is very different in that for a theory we'll. [00:07:05][3.4]

Alec: [00:07:05] Move to after the merge. Now, help me understand the difference between the two here. [00:07:10][4.8]

Tracey Plowman: [00:07:10] Okay. So again, a lot of jargon terms, but both of these these terms really mean the same thing in two different ways. And what they do is they help ensure the users are honest with their transactions. So proof of work has been successful because that's what Bitcoin users and that got Bitcoin off the ground 13 years ago. But now crypto, well, it's $1,000,000,000 industry, so it needs to do things a little better now. So in proof of work, you verify cryptocurrency transactions and that's done through mining. So anyone that's heard of crypto has heard the term of mining and we're not talking about Rio Tinto over here, why we're talking about the process of discovering new blocks, verifying the transactions and then adding those to the Bitcoin blockchain. So each time one of these new blocks is discovered, the miners get a reward in Bitcoin, and that's the abridged version. So this is really energy in set intensive and proof of stake. Now, this is a completely different way of doing things. The validators are chosen based on a different set of rules, depending on a stake that they have in the blockchain. What I mean here is how much of that token and in this case we're talking about the Ethereum token and how much of that they have committed to locking up and they had a chance in of being a validator. So in both cases, the cryptocurrencies that we're talking about are designed to be decentralised and distributed, which means that both of the transactions are visible and verified through these computers worldwide. So both very different, but both again, decentralised. [00:08:46][95.8]

Alec: [00:08:47] In a nutshell, it goes from having to solve really complicated mathematical equations with supercomputers to add records to the blockchain to now having to own and I guess put up your stake in the cryptocurrency is that is that fair enough. [00:09:02][15.1]

Tracey Plowman: [00:09:02] You've got to explain to that we can get involved here. So there's an option for someone to own 32 Ethereum and stake them yourselves so we can also get involved as validators. [00:09:10][7.8]

Alec: [00:09:11] We're going from solving complicated mathematical equations to staking your own cryptocurrency. Why, like, why is this important? Why is the team behind the Ethereum? What is this? On their roadmap to becoming the world's decentralised supercomputer. [00:09:26][15.0]

Tracey Plowman: [00:09:26] Vitalik was asked this question. I think there's a lot of different steps to get to where he needs to get to. And this one's become really important because of the the question that people are asking about the energy. The big win here is is 99.9% less energy. So it's a big win for the greenies amongst us. It's all coming down to the transaction per second. I think what he wants to get to there are 100,000 transactions per 15 to 20 seconds. That's the end goal, but that's going to be years and there's different steps along the way to getting there. So this is just the first one. And this has been this merge is been, I think three or four years in the making. It's taken a long time. [00:10:06][39.8]

Alec: [00:10:07] So Tracey, it sounds like Ethereum has become a little bit of a victim of its own success here. It's become so popular, so widely used, that it's consuming a lot of energy and that the number of transactions that people are trying to record on the blockchain is making it inefficient. So this is an effort to help it scale and help it manage. Just the amount of people trying to use it. Is that is that sort of what the intention is here? [00:10:31][24.5]

Tracey Plowman: [00:10:32] Absolutely. Yeah. Since it's currently the most used blockchain in terms of transactions, this is going to change the amount of electricity use each year by a huge amount. I think that the number thrown out there is it's Chile's power consumption each year. So this is going to take that right back down to 0.4%. [00:10:49][17.5]

Alec: [00:10:50] So Tracey, I may not understand the technicals of it all, but I certainly understand the intention. Now this merge is to make Ethereum more scalable without consuming more energy. So let's take a break and then talk about what happens beyond the merge. Is the theorem going to become more a part of my daily life? Now I am an avid crypto curious listener, and if people aren't listening to the podcast, they should get on it. And I've heard that beyond the merge, there's a number of other urges. There's a surge, there's a verge, there's a purge, there's a splurge. Beyond the creative naming here. What's the broader plan with all these different urges for a theory? [00:11:32][41.5]

Tracey Plowman: [00:11:32] Yeah, you're right. The surge of urge, the purge and the splurge. I know it's a bit to get our mouths around. And we did like and Craig and I spoke about this one a few weeks back. So Vitalik mentioned this one a little while ago in a speech he gave and said that this merge is actually only 55% of the way done when it comes to a theory. I mean, he's got some some grand plans for the roadmap and there's, you know, many innovations along the way that are going to make it more robust and scalable for the future. So that's where these surge, merge, purge and splurge has come into, just to give you a real high level because it kind of geeks out from here. But the surge will introduce Sharding, which is another really kind of technical, geeky term of things, but that increases the network scalability. The verge will reduce the node sizes, and that helps a few Ethereum become more scalable as well. And the splurge, well, that one just kind of makes the upgrades run a lot more smoother and vitalik sorry cause this one, the fun stuff. So I think that's that's the last one that happens. So, you know, sorry, the purge of Mr. Purge, which is the horrible sounding one, but that one reduces the network congestion. So again, all of these things, though, are going to happen over the next few years if they if it runs smoothly. That's the completion of the roadmap, which is years away. And it's going to make things faster, cheaper and more secure and more scalable. And and one of those enable will hopefully lower the gas price because unfortunately, this merge in the next few days or hours won't do anything for the gas price. So that's a bit of a bummer. [00:13:12][100.1]

Alec: [00:13:13] So shotting node sizes, gas prices, I'm getting lost in all the jargon. I guess if you if you pull it back and really ground it in what matters for someone who's not in as much in the crypto world as you can, you sort of paint the world pre the urges, let's call it pre the merge surge, merge, purge and splurge the world, the world of Ethereum before the edges and the world after the edges. [00:13:38][25.5]

Tracey Plowman: [00:13:39] You know, what's really hard at the moment is, you know, when I try and tell people about, you know, when I try and explain to people what Bitcoin is, people have at least heard of Bitcoin. They understand a little bit about what Bitcoin is and peer to peer exchange of cash. And when I have to sit down and explain what Ethereum is, it's a little bit harder when and when I try and do that. And then when I sit them down and tell them what Metamask is and how to use this app and how to use that app, and oh, hang on, if you want to buy an NFT, if you wanna do this, you've got to download this thing and download that. There's so many moving parts right now when it comes to Ethereum and what you need to do to interact with Ethereum, that, you know, in some instances you do need to have, you know, a degree in, you know, some kind of cryptology or development. You need to have some kind of understanding. When we see all of these parts of Ethereum's roadmap in place, it'll be as easy as, you know, getting a mobile phone, downloading an app and interacting with that. Because that's what's missing in crypto at the moment is the ease of use. You know, we've not seen, you know, mass adoption on a big scale because it's not as simple. It's not that one step ease of use that's there. And I think when a Ethereum finishes that roadmap, it'll be a household name, easy to use as much as picking up your mobile phone and downloading an app like band or anything that you use. It'll be simple. I think that's what Ethereum will be at the end. [00:15:01][82.7]

Alec: [00:15:02] Yeah, I hope. I don't mean that. That's the development trajectory that the Internet took beforehand, that at first it was the domain of people that studied computer science and knew how to write in HTML or whatever the computer language of the time was. And now, you know, people like me can use a computer and do what we need to do. And it makes sense that that's the development journey that cryptocurrency and the Ethereum needs to go on. I guess for most people today, the exposure they have to Ethereum is by holding the cryptocurrency Aether. Is this merge going to change the price? Is it going to change the investment? Do we need to do anything for as part of the merge? If all our exposure is just owning some cryptocurrency, does it change anything for us? [00:15:51][49.0]

Tracey Plowman: [00:15:52] No, I well, that's you know, that's one thing to really note is that today if you do hold any Ethereum going into the merge is nothing that you have to do right now. No. You know, I have seen a few scams that have popped up telling that you need to do things or click on links. Please don't do that if you hold you, Ethereum, there's nothing you need to do. In fact, a lot of the bigger exchange. Angels in smaller ones are closing things down so you won't be able to do anything with the Ethereum that you do have at this point. But if you do hold it through them, let's see where it goes. I mean, look, I'm a massive fence sitter at the moment. A lot of people are talking about, you know, you you buy the rumour and sell the news and who knows where it's going to go. I'm unsure. The fact that, you know, ETH is going green, I think means it will see a lot of major financial institutions like the investment banks and pension funds look to get their money into this space now. So I think there potentially might be a nosedive, you know, straight after the merger happens. We'll see. Who knows, though? Crypto likes to keep us on our toes and do the opposite of what we expect it to do, doesn't it? So who knows? I think a lot of people believe that, you know, the biggest institutional objections to getting more money into the space may have been this green side of things is to buy it. And now that we see, you know, 99% of that gone. [00:17:09][77.2]

Alec: [00:17:09] Now Trace, I'm sure a lot of people have got a little bit lost in the jargon, but hopefully they have a bit more of an understanding about what's happening with the merge and all the urges after it. But I guess just to close it out when, when we talk about Ethereum and we talk about, you know, becoming a global decentralised computer and it becoming as easy to use as a mobile phone and downloading a mobile app is today. What are some of the use cases of Ethereum that get you the most excited that we should be aware of? So we can sort of start to understand how Ethereum might more and more fit into our daily lives. [00:17:47][37.6]

Tracey Plowman: [00:17:47] There's a lot of things, like you said, being built out on a theme. And so anything that you interact with every day right now that's on your mobile phone will eventually be built out as an app through Ethereum. So, you know, there's a version of Spotify being built out right now via, you know, a Ethereum. There's cloud storage and being built out via Ethereum. Anything that you use on the day to day will eventually be built out via Ethereum. Yeah, look, I'm excited to see where Ethereum goes. I'm a really big Ethereum fan and who listens to the crypto? Curious will know that Ethereum is my number one. But further on from that, I know we've got Fin Fest coming up and we will be there floating around. So if anyone wants to come and talk about Ethereum and learn a little bit more about the jargon that I've gone through today, then come along to film, invest and find me and feel free to ask me any questions because I'd love to talk. 

Alec: [00:18:37] I love that, Tris. Love the plug. It is a brave new world that we're entering with this world of crypto. I can't say I understand it, but I'm certainly interested in learning more about it. I'm sure we'll have you back on the dive to help us understand it more in the future. So thanks for joining us today. 

Tracey Plowman: [00:18:52] No problem at all. Thanks for having me.

Sascha: [00:18:56] Alec. What a great shout out for Fin Fest. I know I'm certainly going to find Trace and ask her all my follow up questions. If you enjoyed this episode, then please tell a friend about it. It really is the best way for a podcast to grow and we appreciate you sending it to all your friends. If you're listening because you've been referred, then welcome. We have a growing back catalogue of episodes to check out. Our last three episodes have been about the changing nature of celebrity endorsements, us banning the sale of semiconductors to China and the battle of the prequels. House of the Dragon versus Rings of Power. So go check them out. Remember, you can follow us on Instagram. We're at the Dive Dot Business News. You can contact us by email, the dive at Equity Mates dot com and subscribe wherever you are listening right now so you never miss an episode. Thanks so much for joining me today, Alec.