The Merge is Over. It's Time for the Surge.

finally complete. The most headline grabbing consequence of that upgrade, of course, relates to energy usage. The switch that upgrade enabled from what's called proof of work to what's known as proof of steak promises to reduce ethereum's energy consumption by a whopping. But there are bigger questions, like what's next? What else is going to happen? What are the other major milestones for the future of ethereum's ecosystem and the

ether token itself? In this episode you'll hear from Bloomberg reports to Olga Karif, a lot of people are expected some kind of issues to arise, perhaps for weeks after the merge happened, and from Bloomberg. Senior editor for Crypto, Dave Lika. There's a lot of expectations that this would be a big deal, which it was, but not from a price perspective. Olga, welcome back. Thank you, glad to be here. You're a busy week recently. Yes, yes, it's

been so exciting with the merge. We will say things like it's been so exciting with the merge because we're fun at parties and says, you know, this is the stuff that we like to talk about. But let's just pagined for a moment. You're not the kind of person who was like staying up all nights to see the merge happen. Why don't you give folks a quick rundown

of exactly what was keeping US busy recently? Sure? So, last week this amazing change was happening on the ethereum black chain, where it moved from ordering transactions using powerful computers called miners to using essentially stacks of coins to do the same thing. And as the result of this change, basically of ethereum's energy consumption went away. And last week a bunch of people interested in all of this stuff

were on an online party basically following this change. Pretty much a lot of people around the world stayed up all night just to watch and see whether this goes smoothly or not, and it went amazingly, amazingly smoothly and ended up not being disruptive in any way. Were is unusual for an upgrade that was basically a very, very large software upgrade that involved thousands of people, lots of moving parts and years of work. Absolutely it's extremely unusual.

A lot of people expected some kind of issues to arise, perhaps for weeks after the merge happened, and none of that has taken place, at least so far. No, no big issues have emerged. You know, this is a very good news because it shows that ethereum developers have the wherewithal to pull something like this off, and hopefully this means, basically that they have the expertise to conduct further upgrades that will, you know, essentially make ethereum even more competitive

versus other technologies out there. Why is the ether price down if everything went super smoothly? Why is ether falling? A lot of people, I think, executed the strategy of they were expecting ether to go up all the way up to the merge and then to drop on the news of the merge, and I think that's exactly what happened. Partially, the reason why people were buying up ether was so that they would get sort of free tokens from additional

block chains that emerged after the upgrade. So what often happens when a block chain goes through a change is that some groups who supported this block chain go, well, we don't like the software change, we want things to stay as they were before, and so in this case there were several groups that split off from ethereum because they wanted the block chain to continue using this powerful

computers called miners to order transactions. And so everybody who held ether when this additional block chains were split off and born ended up with free tokens, additional tokens that they got that have some value. And so a lot of people who are accumulating ether to get these free tokens and now that they got them, they got rid of their ether. Let's kind of switch from this is what happened, to what folks are expecting, and I'm just gonna say some words here, because I'm I'm just gonna

say these words. The surge, the verge, the purge, the splurge. It somehow got worse with every with every word. But these are like the next merges, as it were. One I don't know if you know, but why are they named this? But, more importantly, what exactly do these stand for? So basically, the merge itself, the software upgrade, doesn't do anything to ethereum block chain's performance. It doesn't make the

block chain faster, doesn't make it cheaper to use. And really, if we want to see the number of transactions on the block chain ramping up, some additional upgrades are needed to get us there, to scale the network, essentially, and so the surge is word that you can think of as like scaling. So how do you scale the blockchain?

And what the ethereum developers are working on? Our technologists like charting, which essentially would lower the cost off running transactions through the ethereum blockchain by sort of distributing a lot of the computational weight, if you will, onto kind

of little chains attached to ethereum. And then the verge is basically a way to increase decentralization where, you know, somebody with a cell phone would be able to start ordering transactions on the blockchain and then you know, the purge is kind of trying to essentially get rid of

all data that might be currently on the blockchain. Essentially, all of this, all of this additional upgrades, are designed to make ethereum kind of competitive with leading payment networks like visa and mastercard in terms of throughput and, you know, of course, more competitive, hopefully, in terms of cost. Why would a blockchain want to compete with these enormous financial services companies? Basically, the idea is to make finance more

decentralized and more, you know, accessible around the world. So with financial instruments today, you have companies or associations of companies controlling essentially financial infrastructure out there. What ethereum hopes to do is to essentially give people control. People all over the world would maintain and support and use this financial network, not just for payments but for all kinds of transactions such as loans and, you know, games and all kinds of other stuff. It took US years to

get to the merge. Is it like three years before we get to the splurge or the verge of the purge or like what? Like? What sort of the timelines that we're looking at here? It's interesting I think because the merge was such a such an enormous undertaking, such a huge one, that's it was tested to death to make it as smooth as as it was Um. That's why it's taken so long. I think some of the other upgrades that will really improve ethereums performance they could

start next year. In other words, the merge, it was like the shift. This is going to be a very old school reference. I apologize to people who aren't the elder millennials, from like DOS to Windows three point one, or, you know, kind of from like a text based command line situation to a gooeyographical user interface, those sorts of fundamental computing shifts. This is sort of the argument of what ethereum needed to go through, and now everything else

is sort of more incremental in comparison. Right. Absolutely it just you know, if the developers of ethereum were able to pull this off, then you know pretty much people can be a lot more comfortable and confident that they will be able to pull off this other upgrades and probably much faster. Got It. Are we expecting anything to

go wrong? Like, you know, we've gotten to this point where, other than the ether price falling, which you know we don't have a sort of a moral position on Um, but you know, you had talked on previous episodes about concerns over n F T S or other types of scams and frauds. Are we at a point where folks think if something was going to go wrong, it would have gone wrong already, or are people still kind of

waiting to see what might shake out? You know, there could still be instances of free play attacks we which are basically where. So now we have different versions of ethereum. After all, this forks and so a replay attack is where somebody takes a legitimate transaction that happened on one of this ethereum offshoots and and place it on on a different one. So we could see more of this replay attacks if some of the APPS UM that run

on this change haven't properly prepared. But uh, you know, overall it doesn't look like we'll see anything major, but you know, never say never, say never. And on that note, thank you. Thank you very much. Always a pleasure to have you on. Thank you freely enjoyed it. Next up, Bloomberg crypto senior editor Dave Letco will join me to talk more about what's been happening to ether p SIS

ethereum just got refound. According to its CO founder of Italic, Buderan, the blockchain network has now completed the CRYPTO's most ambitious change to date. Dave, what a pleasure to have you back in the studio. Thanks to days for having me. I feel like you're only here when all hell is breaking loose, but this week, maybe this is famous last words. This week post merge has been mostly calm, except for what's happening to the ether price. So, in this crypto focus,

what's been happening to the markets? There's been a lot of talk about selling the news on it. The after the merge went through. I was at least sleeping rated smoothly and our colleagues handled it overseas. You had to sell off the next day in Ethereum, but yeah, she was selling off into the news about three or four days ahead of time. So there's a lot of expectations that this would be a big deal, which it was,

but not from a price perspective. So when we talk about, you know, the most market see of phrases sell the news. That phrases often preceded by by the rumor sell the news. In this case, the rumor was like the merge is actually going to happen. Right, people have been hearing that for literal years. For the most I heard was seven, eight years. I guess. It's been talked about basically since the birth of ethereum. And if you look back, this

year has been a tough year for all cryptocurrencies. Both ethereum and Bitcoin are down proxim this year as a risk aversion has taken over the market. And if you really wanted to buy the rumor, it was last year when ethereum was up, I believe, about on it and Bitcoin. How did these in year? He had a little with the end, but it was up around sixties. So you can see the comparison. There was the rush into what

was the going to be the hot coin. And you know, when we talk about the risk aversion of the change in sentiment in the markets, like what's the main thing that's driving that for Crypto? But broadly well, it's a fed Um. As an old bond and currency reporter Um. We're taught a long time ago can't fight the Fed, and the crypto folks finding that out this year. Right, you heard it from Dave don't try to fight the Fed. It ends in pain and losses until this is over.

That's usually the prognosis thought that you're until there's a clear sense that the Fed has done raising rates, you're gonna be what they called the pain trade and this idea of you know, Crypto, bitcoin ether really acting like risk assets. We've reported on the fact that this seems to be another example of how correlated it is to broader markets. Right, because it's it's not just the bitcoins having a bad day, it's the you know, the mega

cap text docs, or it's, you know, retailers. Is this is sort of a widespread thing across the market that we're seeing. It is and it's they we've talked about and written quite a few stories about it. Is that a little bit of the irony of all this says. CRYPTO was billed as the alternative financial universe. We're not going to trade like stocks and Mons Do. This is your financial future. This is a new asset class, a

word different, and they're proven to be not. And just as a kind of a closing thing, you know our listeners just heard from Olga giving us all of the perhaps unfortunately named next steps for for the ethereum blockchain, including my least favorite, the splurge, which is, let's be clear, a terrible word. Well, what are some of the next milestones you think folks were looking for from that pricing

or trading perspective? Are The indicators in the way that people are positioned in the market that you know the ethereum price is going to continue to sort of hover where it is, or are you expecting more, or at least our analysts expecting more declines? Like, what is that looking like? Well, we're kind of trying to get our head around what the market is telling us right now.

We have a lot of debate right now on our actually on our news desk on what we could tell by the futures market now that the there's been a four concluded in the merge where you receive this extra coin for ethereum proof of work. People looked at that almost as a dividend and people were trading as a dividend. So that made the sort of a little bit of what's going on in the futures market and everybody's still looking for that answer right now. But I think in

the end it really circles back to the Fed. What happens there, whether people are willing to embrace risk. And probably more important for Crisp Crypto is how can you get people more interested again in this sector and to commit money right b this is the you know, retail investors are really sitting this one out, or at least are mostly on the sidelines, in a way that folks

perhaps have not been expecting to last this loan. And the unique thing about Crypto is that was a retail first market and without retail there it becomes a big question mark. That is an excellent note to end on. Thank you so much, Dave. Thank you to Olga and today for joining us today. You can find more of their work on the Bloomberg terminal, on Bloomberg Dot Com and on twitter. Olga is at Olga Karif. That's O L G A K H A R I F, and

Dave is at D Liqua. That's D L I E D T K A. on the next episode of Bloomberg Crypto we will be reflecting on the twelve months between China's most recent crackdown on crypto and crypto mining in the country and what's been happening since. One of the biggest effects of that ban was dozens and dozens of major Chinese mining companies leaving China and moving to the US. This is Bloomberg Crypto, a daily podcast from Blue Burg

and I heart radio. For more shows from I heart radio, visit the I heart radio APP, apple podcasts or wherever you get your podcasts. Send US your comments, questions or suggestions for the show to Crypto at Bloomberg Dot net or find us on twitter. We're at CRYPTO. The supervising producer of Bloomberg Crypto is Vicky Very Galina. Our senior producer is Janet Babin. Our producer is Sharon Barriro. Associate producer is ty Butler. Desta wonder at is our engineer.

Original Music by Leo Sidrin. I'm Stacy Marie Schmal. We'll be back tomorrow.