The moment is finally here. After waiting for what feels like forever, the Ethereum (ETH) Merge was successfully implemented on Sept. 15, as scheduled. With the Merge, Ethereum has switched from a proof-of-work consensus algorithm like Bitcoin to a proof-of-stake consensus mechanism like Cardano, Avalanche, and Polkadot. With the switch, ETH’s energy consumption has dropped a whopping 99%. So what effect, if any, will the Merge have on online gambling and other related industries?
What is the ETH Merge?
In December 2020, Ethereum launched a beacon chain, the first step towards its change from being a proof-of-work (POW) blockchain to a proof-of-stake (POS) blockchain. As a result, ETH users with at least 32 ETH could become validators for Ethereum 2.0, locking up their ETH for future rewards as they awaited the launch of ETH2 and the eventual Merge. Flash-forward to the present day, and the Merge is here. This current Merge stage is just the first in a line of many to come, all of which need to be completed in order to truly make Ethereum scalable. At present, the effects of the Merge are ostensibly just the energy consumption change.
Will the ETH Merge Affect Online Gambling?
The simple answer is: no, it won’t change online gaming and ethereum poker in the immediate short-term. While the Merge is an important step for Ethereum and the cryptocurrency sector in general, it doesn’t change much other than the type of consensus algorithm that Ethereum uses. Things like lower transaction fees and faster transaction speeds won’t come around until a few more steps are completed (see image below).
Vitalik Buterin, one of the founders and the face of Ethereum, has stated that the Merge is just the first of 5 stages. The Verge, the next step, is likely when you’ll see a noticeable effect on online gambling. This is when transaction speed and throughput will increase. For poker sites that accept ETH and blockchain-based poker platforms, this will mean lower transaction fees for them and their customers, making the platforms more attractive. It will also increase throughput, meaning more users can access these platforms simultaneously and participate without delays in payment processing or payouts. But, until The Verge happens, it’s business as usual for online gambling and ethereum poker sites.
ETH Miners Gamble on ETHPoW and Lose
With Ethereum switching from proof-of-work to proof-of-stake, many ETH miners have been looking for an alternative asset to mine. This effort is an attempt to replace the billions of dollars earned from ETH mining. While some planned to turn to Ethereum Classic (ETC), a new project called ETHPoW (ETHW) also emerged and was quickly supported by prominent crypto bigwigs such as Tron founder Justin Sun.
The ETHPoW chain was forked from the ETH chain at the time of the Merge, so those who gambled on using it to earn mining rewards lost out. The ChainID posted by the project was, in fact, the wrong one, meaning many miners were unable to do so. In addition, the price of ETHW went from $22 to $16, then back to $23, before plummeting to under $10, all within 8 hours. At these prices, even those successfully able to mine ETHW are unlikely to even cover their mining electricity costs.