Can the Merge fix crypto?

Hello, it’s Hannah in San Francisco. All anyone can talk about in crypto is the success of an Ethereum upgrade known as the Merge. But first [View in browser]( [Bloomberg]( Hello, it’s Hannah in San Francisco. All anyone can talk about in crypto is the success of an Ethereum upgrade known as the Merge. But first… Today’s must-reads: • Uber is evaluating the damage after a message appeared in the company slack proclaiming “[I am a hacker](” • Uber’s breach came the day before its CEO testified at the trial of its [former security chief]( • An [abundance of new video games]( may not be great news for the industry Ethereum’s victory lap The Merge could have been a disaster of epic proportions last week. A failed or buggy overhaul of the Ethereum blockchain would’ve likely crashed digital asset prices, disrupted trading and worsened an already icy crypto winter. Instead, everything seems to have gone just fine—rivaling an iPhone update in seamlessness. This major win represents a bright spot for the industry at a time when the prices of Bitcoin and Ether remain far below their previous highs, crypto venture capital investing is in decline and regulators are putting digital assets in their crosshairs. Still, it’s not a panacea for crypto’s ills. The software upgrade, which changes how Ethereum orders and verifies transactions, addresses a key criticism of crypto: its negative environmental impact. But it only does that for the Ethereum blockchain. There still are plenty of other blockchains using the old, energy-guzzling system, including the largest one, Bitcoin. Before the Merge, creating Ethereum tokens required an energy-intensive process called proof of work. That meant using massive amounts of computing power to solve complex mathematical problems in order to add transactions to the blockchain. Now, Ethereum has switched to a more eco-friendly method known as proof of stake. In this model, users lock up their Ether in a pool through a process known as staking. They are then randomly selected to validate transactions. This new process is supposed to reduce Ethereum’s electricity usage by 99%, saving an amount almost equivalent to the annual energy consumption of New Zealand. While Ethereum’s move might raise the pressure on Bitcoin and other competing blockchains to make similar changes, they’re likely to face stiff resistance. Many Bitcoin proponents believe that proof of work is more secure and decentralized than proof of stake, and that switching over would undermine the blockchain’s core principles. Since Bitcoin has by far the largest market cap of any cryptocurrency, its commitment to proof of work will slow meaningful progress on crypto energy consumption. The White House underscored that point earlier this month with a report that said Bitcoin mining inhibits the US from combating climate change. Ethereum’s overhaul also doesn’t fix some of the other problems facing the blockchain, and even has the potential to create new obstacles. While the Merge will make it easier to introduce upgrades that make Ethereum faster and cheaper to use, it won’t immediately mitigate network congestion or high transaction costs. The first NFT minted after Ethereum’s switch to proof of stake came with [more than $60,000 in fees](. There’s also a risk that the Merge will invite more regulatory scrutiny. The US Securities and Exchange Commission Chair Gary Gensler said Thursday that using proof of stake could cause a blockchain’s tokens to be considered securities, a label that many in the digital asset industry have been trying to avoid because of the increased regulatory requirements and oversight that comes with it. Gensler’s comment shows that even well-meaning changes aren’t dissuading regulators from trying to rein in the unruly industry. The Merge was a victory to be sure, as plenty of celebratory memes can attest, but it’s a long way from resolving the industry’s persistent issues. Notably, the day after it happened, the price of Ether fell to just over $1,400, hitting [a seven-week low](. The crypto winter doesn’t seem to be getting any closer to thawing. —[Hannah Miller](mailto:hmiller129@bloomberg.net) The big story How college dropout Dylan Field turned his Thiel Fellowship into a $2 billion fortune. The young Figma co-founder became the [richest Thiel fellow]( after the company’s $20 billion deal with Adobe. What else you need to know Jeff Bezos is no longer the world’s [second-richest person](. Tech stocks had a [rough run]( last week. Amazon’s proposals to settle two European Union competition probes [received a guarded welcome]( from Competition Commissioner Margrethe Vestager. SpaceX wants to show the world its Starlink satellite system can deliver Netflix and YouTube [at 30,000 feet](. Smartphone location data gets a closer look. Post-Roe, concerns that data broker services could be used to [enforce anti-abortion laws]( have highlighted the lack of rules governing the industry. Bloomberg TV discussed Uber’s woes, and what constitutes [a data breach](. Join Bloomberg Live in London for the [Bloomberg Technology Summit]( on Sept. 28 to see Europe’s business leaders, policymakers, entrepreneurs and investors explain how they’re adapting to this new environment—and discuss solution-based strategies. Follow Us More from Bloomberg Dig gadgets or video games? [Sign up for Power On]( to get Apple scoops, consumer tech news and more in your inbox on Sundays. [Sign up for Game On]( to go deep inside the video game business, delivered on Fridays. Why not try both? Like getting this newsletter? 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