• Ethereum completed its shift to a more energy-efficient system for powering its network in 2022.
• The Merge was marked with both positives and negatives, including concerns about centralization and deflationary asset value.
• The year was also marked with issues such as censorship, hacks, and high transaction costs and slow network speeds.
In 2022, Ethereum achieved a major milestone in its journey to create a global computer and decentralized financial system. Following a long-awaited upgrade, the second-largest blockchain finally completed its switch to a more energy-efficient system for powering its network. While this upgrade was widely celebrated by the Ethereum community, there were significant risks and issues that accompanied the Merge.
Ethereum’s transition to the new proof-of-stake (PoS) consensus algorithm was estimated to reduce the network’s energy consumption by a whopping 99%. However, the PoS system, which requires validators to “stake” ether (ETH) with the chain for the chance to write transactions to its ledger, has been met with accusations of centralization. Additionally, the Merge did not directly address Ethereum’s high transaction costs and slow network speeds. Further, the event coincided with a bear market, leaving the price of ETH to drop more than 20% since the Merge.
The year was also marred with other issues such as censorship, hacks, and more. In January, a group of miners attempted to censor a high-profile transaction, leading many to fear that Ethereum’s decentralization could be at risk. Later in the year, there were a series of record-shattering hacks on Ethereum-linked infrastructure, raising questions about the security of the chain.
Though the Merge was a major advancement for Ethereum, the event left many pressing issues unresolved. The blockchain’s high transaction costs and slow network speeds, combined with censorship and security concerns, remain major obstacles for the chain as it strives to become a global computer and decentralized financial system. As Ethereum continues to push the boundaries of blockchain technology, only time will tell what the future holds for the project.