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An image from ConsenSys’ informational video on The Merge.
Marketers’ favorite blockchain is about to become 2,000 times more desirable. That’s because an imminent upgrade to Ethereum—the home for over 80% of all NFTs—will reduce the network’s energy usage by 99.95%, rendering the chain some 2,000 times more sustainable, according to experts.
This multi-day upgrade, scheduled for Sept. 13-15, is called “The Merge,” a reference to the outcome that will unite Ethereum’s main blockchain with a separate chain—the Beacon chain—that has been testing the new, eco-friendly infrastructure for more than a year and a half. Once merged with the Beacon chain, Ethereum will adopt this infrastructure, called “proof of stake,” as its own.
For brands, not only does this upgrade relieve a serious concern about NFTs and sustainability, but it may also present opportunities to onboard more consumers into the Web3 space.
Ever since their emergence into the public spotlight last year, NFTs have been controversial, particularly because of their reliance on Ethereum’s energy-intensive framework. The production of one NFT has been reported to emit as much carbon as a car that drives 500 miles. Considering most brands’ collections contain hundreds or even thousands of tokens, the cumulative impact can be devastating to the already embattled environment.
After The Merge, however, this impact will become negligible, carrying a per-NFT carbon emission closer to that of 20 minutes of TV than a cross-country road trip. Brands including Gap and Blockchain Creative Labs expressed heightened interest in Ethereum as a direct result of The Merge.
“[There’s] this really big apprehension around the eco-friendliness of crypto and Web3, and I think that because The Merge will enable [the network] to be much less energy-intensive, it will be an answer to that question,” said Julian Alexander, senior strategist of Web3 and metaverse at agency R/GA.
Still, the mere execution of The Merge does not guarantee success for brands. Ineffective marketing will do little to convince consumers that things have changed, especially younger generations who are more likely to value sustainability.
There also remain serious imperfections of Ethereum that could deter brands from using the network. High transaction fees and low throughput (transactions per second) may send brands shopping for any one of the numerous competing chains on the market, from the UX-friendly Solana to Dapper Labs’ highly scalable Flow.
Ethereum’s upgrade offers brands the chance to attract scores of new consumers who are skeptical of Web3’s environmental impact. But this advantage is only as helpful as the marketing used to explain the changes.
“The big challenge is going to be pushing the narrative,” said Ty Duperron, chief product officer of software company Daz 3D. “Until that happens, it doesn’t matter if you’re right or wrong.”
Pushing a new narrative, especially when it conflicts with the dominant public perception, can only be achieved through proper education.
ConsenSys, a blockchain technology company, is attempting to educate via a campaign that will feature influencers, subject matter experts and NFTs. The effort is anchored by an interactive website that explains the upgrade and its three main areas of improvement: sustainability, security and scalability. (The proof-of-stake model is considered more secure because it eases the barriers to become a steward of the network, thus increasing decentralization. And while The Merge will not immediately improve scalability, it does open the door for such upgrades in the future.)
“We really want to help demystify some of the technical advances and help people understand what the underlying meaning of this shift is going to be,” said ConsenSys Chief Marketing Officer Neal Gorevic.
Duperron has been advising brands to take it upon themselves to educate consumers, as they often do for NFT drops. Now, instead of describing on microsites or press releases the purpose, cost and function of their NFTs, they might explain how new Ethereum-based NFTs emit less carbon than old ones, while providing reliable resources to ensure trust.
In the world of blockchain, it’s easy to get bogged down by technical details, which is why brands should prioritize explaining outcomes over technology, said Donnie Dinch, CEO of NFT platform Bitski.
“How brands should be thinking about blockchain [is], ‘What new user experiences and new products can we create with this?’ and focus on the benefits of that,” he said.
If the task of educating is done properly, experts aren’t ruling out the potential for a boom in post-Merge Web3 activity from brands.
“I think that could be highly likely,” said R/GA’s Alexander. He added that brands have realized that they need to include Web3 activations as part of their long-term marketing strategy, pointing to Starbucks and its forthcoming NFT loyalty program as an example.
Gap continues to drop NFTs on another proof-of-stake blockchain called Tezos, but views The Merge as a reason to consider activating on Ethereum.
“Ethereum switching to a proof-of-stake is a welcome sign in the evolution of the metaverse … and expands options for us as we evaluate future drops,” said a spokesperson for Gap.
Fox-owned Blockchain Creative Labs (BCL) sees The Merge specifically attracting outside creators and collectors looking for a less carbon-heavy experience, Melody Hildebrandt, president of BCL and chief information security officer of Fox Entertainment, wrote in an email.
Since late last year, several brands have announced, then promptly scrapped NFT-related projects due to backlash from their audiences—most concerned with environmental impact. MeUndies, for example, pulled its plan to feature Bored Ape imagery on underwear.
How this cohort will respond to The Merge remains to be seen. A spokeswoman for the U.K. arm of the World Wildlife Foundation, which in February canceled its plan to mint NFTs of endangered animals, told Ad Age that it “currently [has] no plans to undertake further testing of NFT activity.” The German arm of the WWF, however, appears to have gone ahead with its own version of the project.
Some experts, like Daz 3D’s Duperron, believe that more brands will side with WWF-Germany as the infrastructural effects of The Merge become known.
“I think this is just another opportunity to move the tech forward,” he said. “Now you can get into a conversation, [with] brands that could never participate going, ‘Oh, okay, what does this look like?’”
A graphic from ConsenSys’ website illustrating the sustainability of post-Merge Ethereum.
Despite the promise offered by The Merge, the upgrade poses new or heightened considerations that brands will have to weigh.
These include the evergreen decision of which blockchain to use. As in the case of BCL, brands could opt for the Ethereum mainnet, which has added value given its prestige as the main chain, said Duperron. NFTs built on the mainnet therefore tend to be perceived as more premium amongst traders.
“Layer 2” blockchains are another option. These networks are built on top of Ethereum, and while they ultimately rely on the mainnet’s operations and security, they often run transactions at a faster clip, while offering less congestion, lower gas fees and a better user experience. They’ve also used eco-friendly infrastructure since their inception. These types of chains that have been popular with brands include Polygon, Palm and Immutable X.
The scalability of these chains could make them more appealing for brands looking to provide an experience as frictionless as possible. R/GA’s Alexander said consumers who are new to crypto likely won’t care about the prestige factor, and will instead be more interested in the overall user experience. A brand that is catering to crypto enthusiasts, however, may have more reason to consider the mainnet.
Meanwhile, there are still plenty of uncertainties surrounding The Merge. Developers have been testing the upgrade for over a year and a half, but bugs, hacks and other surprises aren’t out of the cards. For these reasons, Alexander has been advising brands to lie low after The Merge and avoid new drops for a month to a month and a half.
“It would be prudent for big brands to wait a little bit and see where the dust settles and if there are any issues that crop up,” he said.
Bitski’s Dunch agreed, saying that if something does go wrong either during the upgrade or in its aftermath, the network will be gloomy for at least a few days—a scenario that could decay consumer trust.
And even if The Merge transitions exactly as hoped, the question remains: Are consumers willing to be convinced out of their skepticism? Sustainable alternatives have already existed for some time in the NFT and Web3 space, but they haven’t been able to pierce mainstream doubt.
“I think a lot of people have probably made up their minds regardless,” said Dunch. “I don’t know if there’s going to be a huge delta in people’s excitement. But I could be wrong.”
In this article:
Asa Hiken is a technology reporter covering digital marketing, social media platforms and innovation. A graduate of Northwestern University, he joined Ad Age after writing for Marketing Dive, where he focused on the alcohol space and digital privacy.