Over the last few weeks, hope that Ethereum's (ETH 2.32%) move to a proof-of-stake consensus mechanism is coming sooner than later helped the broader crypto market thaw from a recent freeze. Known as The Merge, this update has been in the works for years now, and should be in place by September this year.
Ethereum's programmable smart contacts are used extensively by decentralized finance (DeFi) developers to create applications like exchanges, lending platforms, and even non-fungible tokens (NFTs). This increase in use was one of the main reasons Ethereum's price rose nearly 500% in 2021. However it is also the same reason congestion increased on the network and caused fees to soar and speeds to slow. The move from the current slow and energy-intensive proof-of-work method to the quicker, less costly proof-of-stake mechanism will help Ethereum increase its network capacity while also lowering fees.
Almost halfway there
While The Merge is one of the most awaited upgrades in cryptocurrency history, recent comments from one of Ethereum's co-founders hint that the blockchain is only getting started in its long-term plan. During an Ethereum Community Conference in France this July, Ethereum co-founder Vitalik Buterin shed some light on what Ethereum's future course may hold and how the blockchain is only 40% of the way to reaching its full potential. He cited three major upgrades on the horizon named "The Surge," "The Verge," and "The Purge," and a final stage of euphoria dubbed "The Splurge." These upgrades are part of a broader vision for Ethereum to ensure the blockchain is capable of supporting more and more users years into the future.
The Surge refers to a new scaling solution known as sharding, which will break Ethereum's blockchain into smaller, more manageable chains. It's kind of like adding lanes to a highway.
As the second phase, The Verge is a part of Ethereum's goal to become more decentralized. At the moment, if you want to become a validator, you must have significant data storage capacity. The Verge will lighten the load of data so that even those without high data storage resources can still become a validator. Validators are the equivalent of miners on a proof of work blockchain like Bitcoin (CRYPTO: BTC) -- they process transactions and add blocks of data to the blockchain.
The last stage of Ethereum's vision, nicknamed The Purge, will eliminate the requirement for validators to store transaction history. This is another step to streamline the blockchain and lower the entry barrier for validators.
And finally, there's The Splurge. Buterin referred to this as "all the other fun stuff" that comes out of Ethereum reaching 100% of its potential. This could mean speeds so fast that transactions are settled in seconds, fees for less than a penny, and all of this while maintaining increased levels of security and decentralization.
Playing the long game today
The long-term plan provided by Buterin should certainly provide Ethereum investors with some optimism. Considering The Merge is set to go live next month, the possibility that there is more to come down the line makes Ethereum look even more attractive at today's prices.
Ethereum was able to hit an all-time high of around $4,600 without The Merge in place, which was already encouraging for the long-term prospects of price appreciation. But the possibility that Buterin's plan for Ethereum is barely halfway complete means the previous all-time high might be crushed in the future.
Ethereum's price around $1,600 today seems too good to be true. A return to the $4,600 mark would be more than a 180% return. But if all goes to plan, The Surge, The Serge, and The Purge should send Ethereum well past its previous all-time high and provide investors with more than just a 180% return from today's prices.