Now known as "the Merge," the Ethereum (ETH 1.20%) upgrade will transition the blockchain from a proof-of-work consensus mechanism to the more efficient and less energy-intensive proof-of-stake method.
As the second-most-valuable cryptocurrency by market cap, Ethereum has become one of the most widely used blockchains in all of crypto. Its smart contracts are integral to building things such as decentralized exchanges, popular ERC-20 tokens like Chainlink or Shiba Inu, lending and borrowing platforms, and much more.
The Ethereum blockchain has seen explosive growth in the last few years due to its extensive use in the DeFi economy. To keep supporting a growing number of users, this upgrade is badly needed.
The Merge will help Ethereum tackle the slower speeds and high fees that have plagued the blockchain when traffic is high. But in order for this merge to take place, developers must implement smaller steps before completely migrating to proof of stake. One of those steps is known as the difficulty bomb.
What is the difficulty bomb?
A major concern in the Ethereum community is that miners will not be motivated to move to proof-of-stake. To combat this, developers created the difficulty bomb.
On a proof-of-work consensus mechanism, miners must solve complex math problems to earn a reward. The difficulty bomb is a piece of code built into Ethereum's blockchain that will make this math problem exponentially more difficult to solve. Eventually the proof-of-work math problems will become impossible to solve and miners will lose profits trying to mine the next block.
As a result, the Ethereum community hopes that this will incentivize miners to abandon the proof-of-work model and migrate to a proof-of-stake method. In order for the Merge to take place, the release of the difficulty bomb must occur.
For this to happen, Ethereum core developers must all be in agreement that enough testing has been accomplished so that the Merge can be unveiled seamlessly.
So far that agreement hasn't happened. Unfortunately, the difficulty bomb has been delayed, again -- for the fifth time.
Developers want to conduct more testing to ensure that the transition will be as smooth as possible. They hope that by mid-September they can reach this goal.
While trying to get an upgrade of this magnitude rolled out without any errors is of the utmost importance since most of the DeFi sector relies on the Ethereum blockchain, the continuous delays can be viewed from two angles.
Critics might take the stance that Ethereum is losing out on valuable time, creating a reputation for missing deadlines, and unable to deliver on goals. Even some developers are beginning to voice their frustrations. Ben Edgington, an Ethereum developer, said on a conference call related to the difficulty bomb delay that, "Every week we twiddle our thumbs, that's a megaton of carbon dioxide we're emitting."
On the other hand, supporters might believe that developers are faced with an extremely challenging task that requires and abundance of caution. This is a similar opinion shared by one Ethereum core developer, Andrew Ashikhman. He stated on the same call as Edgington that another delay was "the best option" and "sends a good signal" that they weren't rushing something that isn't quite ready.
Both critics and supporters can likely agree on one thing though -- Ethereum is at a crossroads. A successful implementation of the Merge could be one of the greatest accomplishments in cryptocurrency history. A smooth transition would transform one of the most widely used blockchains be a more streamlined and affordable network capable of supporting a multitude of applications in the crypto economy.
But if Ethereum developers are able to unveil the Merge in a semi-timely fashion, it could mean trouble going forward. The longer the Merge takes, then the more likely it becomes that other smart contract capable blockchains like Solana, Avalanche, or Cardano are able to grab market share.
Only time will tell if Ethereum is able to hold on to its dominance of DeFi.