The merge: base-layer incentives at work
September 16th, 2022

By Sam Rosenblum

tl;dr – the Ethereum merge is a historic milestone for the crypto ecosystem and a good reminder that core infrastructure is still in an early development phase; the full crypto tech stack will continue to evolve in parallel for a long time to come.

The merge took place late last night (PT), marking the transition of Ethereum from Proof of Work to Proof of Stake consensus. It was the culmination of years of work among participants in a decentralized ecosystem: research by the Ethereum Foundation, software implementation and refinement by individual contributors from around the world, and coordination among a global set of independent validators all motivated by the greater good and economic self interest.

For Ethereum, this was nothing short of a historic accomplishment. The core processing unit of a globally open, distributed network was seamlessly upgraded without downtime, while supporting hundreds of billions of dollars in value. It also represents a key milestone towards the intended end state of the protocol. With several major upgrades now behind us, we stand roughly at the halfway point of Ethereum’s current engineering roadmap.

However, the merge is not only significant because of the transition of Ethereum to Proof of Stake; it’s also a demonstration of the core values of crypto at work, a reminder of where we stand in the grand scheme, and a hint of things to come.

Given how many “crypto-years” seem to fly by every 12 months, it’s easy to forget that crypto as financially incentivized open-source software development has only really existed for about seven years now (counting from the initial release of Ethereum in Summer 2015). In fact, the crypto tech stack is the first example in history of compelling financial incentives in place for continued innovation at the protocol level.

Consider this: while the number of emails sent worldwide increases each year and the Gmail application is updated multiple times each month, SMTP (the core email protocol) has not been meaningfully upgraded in decades. Meanwhile, the world’s most valuable smart contract platform, which was just upgraded by a decentralized community of individuals and organizations, will continue to be improved upon for as long as we have effective incentive mechanisms in place.

While we’re still so early in the scheme of what we hope to accomplish as an industry and ecosystem, the rate of exploration, iteration, and invention has never been higher. The best is truly yet to come.

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