ETH Merge will change the way enterprises look at Ethereum for business

A recent report from the Ethereum Enterprise Alliance (EEA) highlights how the Ethereum ecosystem has matured to a point where the network can be used by businesses to solve real-world problems. From supply chain management use cases to payment solutions used by companies like Visa and PayPal, the report demonstrates how the Ethereum network has grown to become one of the most valuable public blockchains.

While notable, the EEA report also points out that the rapid growth of the Ethereum ecosystem has created a number of challenges for companies, particularly in terms of energy consumption, scalability and privacy. For example, the paper states that “sustainability has been cited as one of the main concerns, along with transaction fees, regarding the use of the Ethereum Mainnet.” The report further explains that the transparency associated with a public blockchain like Ethereum is a barrier for enterprises , looking for data security and trust.

As such, upgrades such as sharding and Layer 2 (L2) scalability solutions remain critical for businesses using the Ethereum network. Yet the complex nature behind such deployments remains difficult for companies to navigate. For example, the EEA report states that “Many Layer 2 solutions and sidechains are relatively new designs, with relatively new technology. They don’t necessarily have experience or proven core network security and stability.

The merger will change the way enterprises look at Ethereum

However, industry experts predict that the Ethereum merger, which is scheduled to take place on September 14, is likely to improve enterprise adoption. Paul Brody, global blockchain leader at EY, told Cointelegraph that while the merger won’t affect most enterprise use cases currently in use, it will change the way businesses perceive Ethereum. He said:

“For years, competing Layer 1 networks have been talking about how Ethereum can’t do the merger. Ethereum’s incredible organizational maturity works well in the background for us to do this in a thoughtful and professional manner. As an enterprise, I want to see that kind of institutional maturity.”

Although Merge has been in development for several years, Brody explained that upgrades to mission-critical infrastructure should never be rushed. As such, he believes this will remain a pivotal moment for businesses using the Ethereum network. “I think future efforts to reject Ethereum will not get much time in the post-merger era,” he said.

While it’s too early to tell how businesses will react to the merger, Robert Crozier, chief architect and head of global blockchain at Allianz Technology, told Cointelegraph that his firm will monitor the progress of the Ethereum merger to see how it stabilizes certain use cases.

Recent: How to deal with high transaction fees in the blockchain ecosystem

This is notable because Crozier shared that Allianz has only looked at Ether (ETH) and Ethereum-based use cases for small-scale experimental purposes. The insurance giant is currently using Hyperledger Fabric and the Corda decentralized ledger platform to streamline cross-border car insurance claims across Europe. Crozier added:

“At Allianz, our international car claims settlement product uses Hyperledger Fabric at its core. We need to understand and be confident that other protocols like Ethereum will provide similar benefits in terms of ease of use, scalability and finality.”

With the benefits in mind, Brody explained that the merger will ultimately lead to better scalability and privacy for enterprises. “I think we’re heading into a new era of enterprise applications. As both scalability and privacy mature, it will be possible to address enterprise process needs quite comprehensively in the future,” he said.

Shedding light on this, Ivan Brakrak, senior decentralized financial market strategist at ConsenSys, told Cointelegraph that while the merger does not directly increase scalability, a number of planned upgrades to Ethereum will address scalability over the next few years.

For example, Brakrak explained that the Ethereum network’s transition from proof-of-work (PoW) to proof-of-stake (PoS) is the first step to enabling “shard chains.” As Cointelegraph previously reported, sharding is the act of splitting a database, or in this case a blockchain, into different smaller chains known as shards.

“This will reduce network congestion and increase transaction throughput,” Brakrak noted. This is key to adoption, as Brody shared that EY’s enterprise clients looking for supply chain applications will need support for 2-20 million transactions per day. “Pre-Merge Ethereum would not have been able to accept this,” he said.

On the privacy front, a report titled “The Convergence for Institutions” published by ConsenSys on September 5th mentions that L2 solutions also address enterprise privacy concerns. Increasing L2 will unlock greater privacy mechanisms for business use cases.

For example, Brody explained that EY developed a zero-knowledge L2 scaling solution known as Nightfall to address Ethereum’s gas limitations and keep fees low. According to Brody, multiple powerful L2 networks will enable different options for enterprises that may require more fuel and larger transactions. He specified:

“Privacy is starting to unlock a much larger set of use cases for enterprise users. For example, instead of minting one token that represents a batch of product and provides provenance information, I can mint one token for each piece of inventory, and then I can manage specific supply chain inventory levels across a multi-company Ethereum network .”

In addition to scalability and privacy, sustainability concerns will be addressed after the merger is implemented. According to Brakrac, Ethereum currently uses an excessive amount of electricity, noting that the merger will reduce energy consumption by 99%. “This will make Ethereum very sustainable in the long term. By design, this further protects the grid and resolves environmental concerns, which is a net positive from an institutional adoption perspective,” he said.

Indeed, industry experts believe that merger-focused sustainability efforts will be critical to enterprise adoption. Dan Burnett, executive director of the EEA, told Cointelegraph that while L2 and sidechains have served as bandages for sustainability concerns, large organizations with environmental, social and governance goals have tended to avoid building solutions on Ethereum due to its reputation for being environmentally friendly. unstable. Still, he noted that once those concerns are addressed, the merger could allow the Ethereum business ecosystem to leap forward.

York Rhodes III, co-founder of blockchain at Microsoft and EEA board member and treasurer, also told Cointelegraph that the merger will end one of the main concerns for businesses that have a strong focus on environmental impact, such as Microsoft.

“This removes one of the key arguments enterprises raise when evaluating whether to build solutions on the Ethereum mainnet,” he said. As for Rhodes, Crozier mentioned that the move to a greener proof-of-stake mechanism will mean that some businesses, such as Allianz, will take a second look at Ethereum.

The benefits are not immediate

All things considered, the merger will likely increase enterprise interest in Ethereum due to the advancement of the network. What’s more, Rhodes believes that removing the key criticism of sustainability will encourage further movement towards the Ethereum Mainnet, even if it’s only as a basic security layer. “As a key step in realizing Ethereum’s vision, the ETH merger sets things up for more enterprise scrutiny sooner rather than later,” he said.

Recent: Lenders of Mt. Gox fail to set a payout date, but markets remain unaffected

However, it is important to note that the benefits promised by the merger will not be seen immediately. According to Brody, it will take at least 12-24 months to establish privacy-enabled use cases after the merger. He said:

“I hope to see pilots by the end of this year, but feedback and infrastructure maturity take time. Unlike consumer applications, there is little patience among enterprise buyers for products that don’t work on first launch and little willingness to experiment. Enterprise buyers are generally quite conservative and so the cycle will take longer than consumer users.”