>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Growing water scarcity, whether caused by drought, contamination, or deteriorating infrastructure, extends to every facet of our lives

Cover Story:
As the labor market settles into a postpandemic normal, millions of employers across the country are still bending over backward to try to hire from a pool of workers that appears increasingly dry. In July alone, U.S. companies posted 11.2 million job openings for a market that has just six million unemployed workers to fill them, a vast disconnect that has been trending wider for more than a year. For all of the Great Resignation talk, the workforce has already surpassed its pre-Covid size—but the economy has continued to grow in the meantime, creating fresh waves of unquenchable demand.

Interview:
A Stanford University–trained electrical engineer who once worked at the old minicomputer giant Digital Equipment, Dan Niles has focused on tech stocks for more than 30 years, initially as a sell-side analyst at Robertson Stephens and Lehman Brothers. He moved to the buy side in 2004, and now runs the Satori Fund, a tech-focused hedge fund. It is in the black for the year, despite the NASDAQ’s 23% loss, due to nimble trading and some smart short sales.

Tech Trader:
The Nasdaq Composite rallied 13% from the publication of that July 11 column through the market peak in mid-August. In that period, stocks benefited from softening interest rates and a widespread view that slashed September-quarter earnings estimates had positioned technology stocks for better performance. But the summer rally is now just a memory, the gains have evaporated, and there are reasons to expect lower lows. I stand by my warning. And the situation has grown grimmer.

The Trader:
From Walmart to Best Buy to Gap, many retailers’ stocks got a boost from quarterly reports in August. The market was quick to cheer companies able to churn out better-than-expected results, despite selling products that had fallen out of favor with shoppers. One thing these companies share is that they cleared a bar they had lowered just weeks before. Many retailers are still struggling with the high inventories that caused so much damage in the first place, with profits dragged down by pricier supply-chain and transport costs. That isn’t a great position to be in when high inflation is eating into Americans’ savings, threatening to tamp down consumer spending.
-Ratings can be confusing. Analysts slap Buy, Strong Buy, Sell, Underperform, Neutral or other labels on stocks, but investors should realize that, really, there’s just Buy or Don’t Buy. Analysts’ desire for self-preservation is one motivation for wishy-washy ratings. Research directors can recount phone calls from offended companies, demanding blood after a Sell has been slapped on their stock. It’s harder to complain about a Hold. The idea that business issues, reputational concerns, and other non-stock considerations might influence ratings—even if subconsciously—might sound more alarming than a Hold that’s really a Don’t Hold. But nothing sinister is going on, says Osman. Most brokerage research is produced for “sophisticated investors,” meaning people who are paid to read it for a living.

Features:
-If 2022 were to end tomorrow, or the day after, it would enter the books as a dismal one for investors. The Dow Jones Industrial Average is down 13% year to date, the S&P 500 index is off 17%, and the once-bubbly Nasdaq Composite is nursing a loss of 25%. The selling could continue into the fall and beyond, given the panoply of factors eating at investor confidence and returns. Inflation is stubbornly high, the Federal Reserve is determined to raise interest rates to cool it, and the world is an even more hostile place now than at the start of the year.
-As the Covid-era labor crunch has laid bare, there are few companies that don’t suffer when workers are scarce and wages are on the rise. But for investors looking to play the shortage, there are strategies for finding those least affected—or even, in some cases, poised to benefit—as the world grapples with a workforce crisis that’s unlikely to ease any time soon. Technology—specifically robots, artificial-intelligence software, and other tools designed to increase automation or worker productivity—has emerged as a critical force for companies facing a labor shortage. Investors have two options here: the companies at work on this tech, or the ones putting it to use.

European Trader:
-Imperial Brands offers potential total returns above 22% over the next 12 months, some analysts say. It markets cigarette brands including Winston, JPS, L&B, and Gauloises, and rolling paper Rizla. It is also developing next-generation products, or NGPs, which include vaping materials and oral nicotine. Imperial Brands “is at the early stages of rebuilding a culture of boring reliability under its new CEO,” according to a report by RBC Capital Markets. In other words, the business is stable and not likely to produce unexpected shocks.

Emerging Markets:
-Emerging market equities are largely a bet on China, which is battling demons of its own making, plus Taiwan and South Korea, whose export powerhouses are vulnerable to a global demand slump. The three countries make up half of the global index. Emerging market bonds are much more dispersed, and fundamentals are arguably better. Key central banks started hiking rates to fight inflation last year. They have nearly finished tightening as the Fed and European Central Bank get started. Brazil is the “poster child,” increasing rates sevenfold, to 13.75%, since March 2021, says Alejo Czerwonko, chief investment officer for Americas emerging markets at UBS Global Wealth Management.

Commodities:
-Oil prices posted their biggest monthly loss of the year in August, despite expectations that major producers may be ready to consider cutting production at the next meeting of the Organization of Petroleum Exporting Countries and its allies, known as OPEC+, on Sept. 5. “The oil market has been sensitive to any news that would suggest a meaningful imbalance between supply and demand,” says Chris Duncan, director of investments at Brandes Investment Partners.

Streetwise:
-In this week’s Streetwise podcast, Jack Hough talks about the next decade and electric vehicles. He suggests that these will require ten times more lithium and cobalt than is currently mined. Will supplies catch up? An economics professor and a metals trader weigh in.

Barrons : Private Equity’s Next Target? Your Favorite Songs from Shakira, Spring

Private Equity’s Next Target? Your Favorite Songs from Shakira, Springsteen, and Pink Floyd.

The next time you listen to “Comfortably Numb” by Pink Floyd on Spotify or Amazon Music, Blackstone may get a slice of the streaming revenue.

That is because Blackstone BX –0.35% (ticker: BX ), through its partnership with Hipgnosis SONG +4.17% Song Management, is said to be bidding for Pink Floyd’s song catalog, which includes “Wish You Were Here,” and “Another Brick in the Wall.” Blackstone is expected to do the deal through Hipgnosis Song Management, the investment advisor of Hipgnosis Song Fund, which owns the music catalogs of Blondie, the Red Hot Chili Peppers, and Neil Young. Hipgnosis declined to comment. Blackstone didn’t return messages for comment.

The Pink Floyd process is the latest sale of a music catalog. Musicians such as David Bowie, Bob Dylan, and Bruce Springsteen have each recently sold their catalogs to investors that include music companies and private equity. Springsteen’s deal, considered the most lucrative, saw the New Jersey musician sell his entire recorded music and songwriting catalogs to Sony Music Entertainment, a statement said. The deal was valued at $500 million, according to the New York Times.

The popularity of streaming has changed the revenue dynamics of music. Subscribers to Spotify Technology SPOT –1.97% ( SPOT ), Amazon Music and Pandora pay a fee, usually about $10 a month, to listen to their favorite songs, which can be new or decades old. This has produced a dependable revenue stream for the platforms and for those that own the music. About 65% of global recorded music revenue in 2021 came from streaming, according to the International Federation of the Phonographic Industry, or IFPI, which represents the recording industry. There is also TikTok where users can also discover new and old music.

It’s this recurring cash flow that has driven the surge of investor interest, according to Reed Phillips, CEO of Oaklins DeSilva+Phillips, a media investment bank. Investors “get paid every time the songs are played via streaming,” Phillips said. This means if a consumer listens to Shakira’s “Hips Don’t Lie” on Spotify or Amazon Music, Hipgnosis gets some money. That is because the Latinx artist sold the rights to her 145-song catalog to Hipgnosis in January 2021. (Blackstone won’t get any money because its $1 billion investment in Hipgnosis came after the Shakira transaction.)

“Music rights are very profitable and predictable, because the work has already been done to create the songs and they have proven their longevity,” Reed said. Aging artists are attracted to these deals, because they can get a lump-sum payment for their life’s work, he said.

Blackstone isn’t the only PE firm that is investing in music catalogs. Apollo Global Management APO +0.31% ( APO ) in October also provided $1 billion to help launch HarbourView Equity Partners, the asset manager led by Sherrese Clarke Soares. HarbourView has since scooped up over 35 catalogs including those of Brad Paisley, Lady A, and Luis Fonsi. Apollo didn’t return messages for comment.

There is also KKR KKR –1.76% ( KKR ) which last year acquired a majority stake of the music catalog of songwriter and producer Ryan Tedder and One Republic, which include songs “Counting Stars” and “Apologize.” The catalog includes nearly 500 songs written, recorded or produced by Tedder with One Republic or with other artists like Beyoncé, Lady Gaga and CardiB. KKR has also teamed up with music company BMG to buy the entire music interests of ZZ Top, and the songwriting catalog of John Legend. KKR also owns a stake in TikTok parent ByteDance.

Providence Equity Partners, the PE firm once known for its media deals, established Tempo Music Investments with Warner Music in 2019. Tempo owns a catalog of rights from Wiz Khalifa, Florida Georgia Line, and Shane McAnally, according to the Providence website. Providence didn’t return messages for comment. (Clarke Soares, of HarbourView, is the founder and former CEO of Tempo.)

The interest in catalog music rights is just the latest step in the evolution of firms like Blackstone and KKR, according to Chris Kotowski, an Oppenheimer analyst. These firms, which now call themselves alternative asset managers, have diversified and have funds focused on credit, real estate and infrastructure. In the past 10 years, there has also been the rise of “tactical opportunities” type pools that can invest in assets that aren’t whole corporate entities, but music rights, drug royalties, or wireless spectrum, Kotowski said. “Gradually, the world came to the conclusion that [PE funds have] a good structure to own a whole bunch of different assets,” he said.

(ZH) Erdogan Issues Threat Of Military Action Against Greece

Erdogan Issues Threat Of Military Action Against Greece

Turkish President Recep Tayyip Erdogan has issued a thinly veiled threat of military action against fellow NATO member Greece in Saturday comments. Erdogan reiterated the Turkish government accusation that Greece is militarizing islands near Turkey's post in contravention of a historic treaty and international agreements.
"You occupying the islands doesn’t bind us," Erdogan said. "When the time comes, we’ll do what’s necessary. As we say, we may come down suddenly one night." He added: "Look at history, if you go further, the price will be heavy."
Image via AP
"We have one sentence to Greece: Don’t forget Izmir," Erdogan said in reference to the 1922 battle which saw Greek forces expelled from the western city. He also more broadly referenced 1919-1922 Greco-Turkish war while provocatively stressing that Greece is "occupying" islands off Turkey.
The fiery words were spoken on the occasion of Turkey's military unveiling a new prototype of an unmanned fighter jet in the city of Samsun, and further days after Ankara has lodged a formal complaint with NATO headquarters, saying that Greece last month achieved radar lock on its F-16s which had been flying over the Mediterranean.
Turkey's Hurriyet Daily announced last week that the defense ministry "will send the radar traces and pictures of the Greek harassment of the Turkish jets by the S-300 air defense systems to NATO as well as to all 30 allied countries, according to sources."
Turkey has also charged that Greek jets have violated its airspace over 250 times in harassing maneuvers. "The ministry also informed that the Greek warplanes violated the Turkish airspace 256 times since the beginning of 2022," the Hurriyet report said. "In addition, they harassed the Turkish jets 158 times this year, the ministry said. On the sea, the Greek coastal guards violated the Turkish territorial waters 33 times, it added."
Greece's foreign ministry has responded by denouncing the "outrageous daily slide" of threats and hostile rhetoric coming out of Ankara. "We will inform our allies and partners on the content of the provocative statements... to make it clear who is setting dynamite to the cohesion of our alliance during a dangerous period," the foreign ministry statement said.
For years, Turkey, Greece and Cyprus have been at odds over expanding Turkish oil and gas drilling rights in the eastern Mediterranean. Turkey is using its occupation of northern Cyprus to say that all waters encircling the island are fair game for its research and drilling vessels.
Other EU members, particularly France, have strongly supported EU-member Cyprus' condemnation of incursions in its territorial waters. France has even conducted a series of joint exercises with Greece and Cyprus in solidarity.

CrunchBase : The Week’s 10 Biggest Funding Rounds: SeatGeek And Triller Raise Bi

The Week’s 10 Biggest Funding Rounds: SeatGeek And Triller Raise Big After SPAC Deals Fall Through

This is a weekly feature that runs down the week’s top 10 funding rounds in the U.S. Check out last week’s biggest funding rounds here.

Last year was the year of the SPAC—this year not so much. As that market has cooled, those companies looking to go public through a “blank-check company” have had to find other ways to finance their operations. Two of those companies lead our list this week.

1. SeatGeek, $238M, ticketing: The decline in the SPAC market stopped New York-based SeatGeek from going public. However, it did not stop the company from raising a lot of money. This week, SeatGeek announced it raised $238 million as part of a Series E at a $1 billion pre-money valuation. The funding announcement comes just about two months after SeatGeek’s $1.35 billion deal to go public via a SPAC was mutually canceled by both the SPAC, RedBall Acquisition Corp., and the company due to unfavorable market conditions. While the amount is less than a fifth of what the company would have raised from its SPAC deal, it does give the company a unicorn valuation and money to expand on its platform. SeatGeek’s SPAC deal was just one of many canceled this year as the market for such vehicles cooled significantly from a record-setting 2021. The new round was led by longtime investor Accel. Founded in 2009, SeatGeek has now raised approximately $400 million, according to Crunchbase data.
2. Triller, $200M, digital media: It was a busy week for Los Angeles-based Triller. It was reported the music and video app—not dissimilar to TikTok— had raised $200 million in financing ahead of a potential $3 billion IPO before the end of the year. The company’s planned $5 billion SPAC deal fell through in June (sound familiar?).The raise was a mix of debt and equity from investors such as Fubon Financial, TheWrap reported. Just a day later, Variety reported Sony Music filed a lawsuit against Triller for copyright infringement when the company allegedly stopped making payments for music used on the platform. This is not the first time Triller has faced legal trouble.
3. JenaValve Technology, $100M, health care: This week was not as big for large rounds going to health care and biotech companies, but that does not mean there aren’t a couple on this list. Irvine, California-based JenaValve Technology—which makes transcatheter aortic valve replacement systems—announced the initial closing of a $100 million Series C led by Bain Capital Life Sciences. Founded in 2006, the health care device startup has now raised nearly $300 million, according to Cruchbase.
4. Solid, $63M, fintech: It doesn’t seem like “fintech” as a sector is that old, but it is—and old fintech architecture that does not always keep up with the current needs of newer fintech and SaaS companies. That is where Solid comes in. The startup offers newer, modern architecture to get payment and banking options up and running through simple APIs. Investors clearly see the market there, as the San Mateo, California-based firm closed a $63 million Series B funding led by FTV Capital. Founded in 2019, the company—previously named Wise— has now raised nearly $81 million, according to Crunchbase data.
5. Bridger Photonics, $55M, energy: Montana-based startups do not pop up on this list often, but Bridger Photonics does this week after securing a $55 million investment from Beaverhead Partners LLC. The company has developed gas mapping LiDAR technology that allows the oil and gas industry to detect and manage emissions. Bridger does this by mounting sensors on small aircraft and scanning oil and gas infrastructure. Founded in 2006, this is the company’s first outside investment, per Crunchbase.
6. Alloy, $52M, fintech: New York-based fintech identity management startup Alloy closed a fresh $52 million round led by Lightspeed Venture Partners and Avenir Growth at a $1.55 billion valuation. Last September, Alloy raised a $100 million Series C, also led by Lightspeed, at a $1.35 billion valuation. Founded in 2015, Alloy has now raised just over $200 million, according to Crunchbase.
7. (tied) Ascend Elements, $50M, battery: Westborough, Massachusetts-based Ascend Elements, a lithium-ion battery recycling and materials startup, closed a strategic investment of $50 million from SK ecoplant. Founded in 2015, the company has raised approximately $151 million, according to Crunchbase.
7. (tied) OneSignal, $50M, marketing automation: San Mateo, California-based customer engagement platform OneSignal secured a $50 million Series C led by BAM Elevate. Founded in 2014, the company says it has now raised more than $80 million.
7. (tied) Vilya, $50M, biotech: Seattle-based biotech medicine company Vilya closed a $50 million Series A led by Arch Venture Partners as part of its launch.
10. StarTree, $47M, analytics: Mountain View, California-based analytics platform developer StarTree closed a $47 million Series B funding led by GGV Capital. Founded in 2018, the company has raised a total of $75 million to date, according to the company.


Big global deals
While U.S.-based startups saw some big rounds this week, the largest went to an online shopping company in Singapore.
  • Lazada Group, an online buying and selling destination in Southeast Asia, closed a $912.5 million round.

CrunchBase : Ethereum ‘Merge’ May Present New Opportunities For Investors

Ethereum ‘Merge’ May Present New Opportunities For Investors

Developers and crypto enthusiasts are not the only ones who will be closely watching Ethereum’s so-called “Merge” in the next couple of weeks.
Investors also will be eyeing the big shift—looking at both opportunities and potential pitfalls.

“This is a huge step forward for Ethereum,” said Jack O’Holleran,the co-founder and CEO of blockchain scalability platform Skale Labs.

What is the Merge?
While talk of the Merge has proliferated as the shift comes closer, the actual change has been in the works for years.
Fundamentally, the Merge is a software transition from using proof-of-work to proof-of-stake to validate transactions. The blockchain successfully tested the transition—or Merge, as it is called—in July and the move to proof-of-stake is now expected in the middle of September.
The change is significant as proof-of-work consensus involves people solving complex equations in order to validate a transaction—also called mining. The method—which is also used by Bitcoin—is extremely energy-intensive and therefore considered by many to be environmentally unfriendly.
On the other hand, proof-of-stake—used by other newer blockchains—allows users to “stake” cryptocurrency in order to be part of a lottery system to validate transactions. While it uses less energy—as well as speeds up transaction time and cuts down on fees—some opponents say the system favors only those with money.
Nevertheless, the Merge is coming to the most popular blockchain and those in the industry will be watching closely.
“I believe it boosts the whole ecosystem,” said Yash Patel, general partner at Telstra Ventures.
Patel said the implications of the Merge will drive further developer interest around new utility and applications built on Ethereum.
“I think the Ethereum ecosystem—and the many VC-backed projects and companies built on it—will receive a boost,” he said.

Investing in the blockchain
While it is difficult to break out venture investment in only Ethereum, blockchain investment as a whole has continued to be strong, even in the slowing market of 2022, according to Crunchbase data. Already this year, VC-backed startups have received nearly $13.6 billion in funding—just off the record pace last year when such companies saw $21.2 billion in investment.
While the Merge may not be the sole driver of new investments, it likely will contribute as Web3 and its usability get worked out, said O’Holleran, who also invests in the blockchain and crypto space.
Investors likely will not just focus on Web3 infrastructure platforms now, but also more future investments in actual Web3 products to compete with current Web2 offerings, he added.
“I think the Merge is more of a piece of the equation” driving investment, O’Holleran said. “But it will drive more investment into Ethereum projects.”

Rollups and crypto
Ethereum’s shift could attract more investment to Layer 2 rollups—which help scale Ethereum with off-chain computation.
“It certainly solidifies it as a scalable network,” said Jake Brukhman, founder and CEO at CoinFund, which focuses on crypto and blockchain investments. “It makes it more attractive to build on.”
Examples of such rollups would include Andreessen Horowitz-backed Optimism and Mir Protocol, which was acquired by India-based Polygon late last year for $400 million.
Lastly, the Merge should be another step in removing the friction associated with crypto going mainstream, Patel said. It also could calm price volatility as true builders move back into the ecosystem versus just price speculators, he added.
However, before looking at new opportunities, investors will be keeping a watchful eye to make sure the Merge goes successfully—especially those with investments around the Ethereum blockchain, Brukhman pointed out.
“Everyone will be looking to see what happens,” said Brukhman, adding he does not expect issues. “Once it is successful, that removes risk.”

TechCrunch : How the upcoming Ethereum Merge could change crypto’s rewards, cost

How the upcoming Ethereum Merge could change crypto’s rewards, costs and reputation

thereum, the second-largest blockchain by market cap, is about to undergo a massive transformation known to the crypto community as “the Merge.”

It’s a long-awaited systemwide upgrade that experts say will reduce the blockchain’s energy consumption by about 99% by switching its transaction verification system away from “proof-of-work,” which relies on crypto “miners” using massive amounts of computing power to validate transactions.

After the Merge, Ethereum will use a “proof-of-stake” system that instead uses an algorithmic lottery to determine who gets to validate transactions (and win tokens as a reward for doing so) out of a pool of “stakers” who temporarily deposit their coins to help secure the network.

Crypto’s environmental impact has long been a point regulators and the public count against it — a single Ethereum transaction, for example, consumes about as much energy as an average U.S. household does during a full workweek, Fortune reported last year. That’s part of why Vitalik Buterin, Ethereum’s most visible founder, has been laying the groundwork for the Merge since as early as 2014.

The upgrade was meant to take place in 2016 but kept getting pushed back by the Ethereum Foundation, the nonprofit that helps maintain the Ethereum blockchain. It seemed like it would finally occur earlier this summer and then was pushed back yet again.

It appears the Merge is finally going to happen on September 15, now that testing has been completed. But despite the longstanding discourse about it, there are still plenty of misconceptions floating around regarding what will actually happen during the Merge.

9to5 : Apple September 7 event: Latest rumors and what to expect

On September 7, Apple will hold its traditional event. Although there are several products the company could be readying, two of them people are expecting the most: the iPhone 14 series and the Apple Watch Series 8. Here’s what Apple could announce at its “Far Out” September event.



iPhone 14 at the Apple September event
The iPhone 14 series will be the star of Apple’s “Far Out” September event. With four new models set to be introduced, expect a lot of hype from a new iPhone 14 Plus. Although the regular models won’t have much to differentiate from the current iPhone 13 generation, a bigger model will be a nice addition.
Expect great changes for the iPhone 14 Pro at the Apple September event, as reported by 9to5Mac. With a new design, a better processor, and huge improvements on the camera’s side, the iPhone 14 series will likely be one of the biggest Apple launches in years.
Latest rumors on the iPhone 14 models
In these past few weeks, 9to5Mac has reported that while there won’t be a price increase for the regular iPhone 14 models, Apple will likely raise iPhone 14 Pro prices by up to $100. In addition to that, a well-known iPhone case leaker shared identical silicon cases for the iPhone 14 line that Apple will likely announce alongside the new phones at its September Event, as you can learn more about it here.
Another leaker shared the iPhone colors he expects Apple to introduce in a few weeks from now:
  • iPhone 14: Green, Purple, Blue, Black, White, and Red. Pink is replaced with Purple, according to his sources;
  • iPhone 14 Pro: Green, Purple, Silver, Gold, and Graphite. He says purple takes the place of Sierra Blue.
In these past few days, 9to5Mac learned that the new, bigger iPhone 14 model will be called iPhone 14 Plus and the new hole-punch + pill on the iPhone 14 Pro will be, actually, a larger pill shape cutout, as you can learn more about it here.

Barrons : Ethereum’s Big Moment Is Coming With ‘The Merge.’ What It Means for Cr

Ethereum’s Big Moment Is Coming With ‘The Merge.’ What It Means for Crypto.

If BitcoinBTCUSD –0.00% is crypto’s answer to gold, Ethereum is the closest thing it has to its own internet. Anyone who wants to mint a new token, launch a crypto app, or spend $150,000 on a Bored Ape nonfungible token, or NFT, probably uses the Ethereum network. More than $3 billion in transaction volume flows through Ethereum daily, traded in the network’s native token, EtherETHUSD +0.38% . About $60 billion in crypto assets sit on its blockchain through third-party apps. Aside from Bitcoin, no other network is more critical to crypto’s infrastructure or its future.

Tinkering with Ethereum is no trifling matter. Yet the network’s developers aren’t just about to tinker—they’re on the cusp of overhauling the core plumbing and mechanics of Ethereum in an upgrade that enthusiasts call The Merge.

The change, slated to happen around Sept. 15, is a big technological risk and could be a transformative moment for crypto. Companies like Coinbase Global COIN –0.41% (ticker: COIN) will feel the impact almost immediately. And there are likely to be ripple effects throughout the industry, touching everyone from crypto miners to chip makers like Nvidia NVDA –2.08% (NVDA), and investors with some Ether in their portfolios.

“The Merge is the most significant upgrade in crypto history,” says Sami Kassab, an analyst for crypto research firm Messari. “It’s similar to changing the engines on an airplane in midflight. One flaw in the code could wreak havoc on the crypto ecosystem.”

Years in the making, The Merge may be crypto’s answer to critics who say the industry is a colossal waste of energy. Ethereum, with a market value of nearly $200 billion, now uses the same method of validating transactions as Bitcoin.

In that process, known as proof of work, computers compete to solve cryptographic puzzles. The network reaches a consensus on the winner, proving that a block of transactions is valid and should be added to the chain. The winner then receives some Bitcoin, a practice known as mining.

It’s highly energy-intensive, requiring a massive amount of computing work and electricity. Ethereum was built on the same system, and it is also an energy hog, using roughly the same amount of electricity in a year as countries like the Netherlands.

Now, developers are scrapping that model and moving to a much greener system for processing transactions, called proof of stake. Instead of mining, Ether owners use their tokens as collateral to validate transactions, “staking” them to the network in exchange for a yield, paid in the Ether token. To participate, a staker must deposit 32 Ether tokens, worth about $50,000, and run some software. The system randomly selects validators, like a lottery. Crypto exchanges and other firms run staking pools, allowing anyone to participate with smaller amounts of Ether.

The shift should eliminate Ether mining. In doing so, it will cut Ethereum’s energy usage by more than 99%, according to the Ethereum Foundation, sharply reducing the network’s carbon footprint.

That’s just the start of a larger makeover. The Merge should also reduce the newly minted Ether that’s produced each year. And developers are planning more upgrades over the next few years that aim to increase Ethereum’s throughput and lower its usage fees. Ideally, they aim to turn Ethereum into the internet of crypto—a base layer for apps, financial services, and many more digital assets like NFTs.

“Today, we talk about decentralized finance. In 10 years, if we are successful, people will just call it finance, full stop,” says Justin Drake, a researcher for the Ethereum Foundation who’s helping with the project. “For almost any financial transaction, they will use Ethereum.”

Yet The Merge may also have casualties. It could cause glitches, outages, or losses of tokens as the current Ethereum blockchain merges with a new one, called Beacon. “A laundry list of elements will need to keep working seamlessly post-Merge to keep exploits and liquidations at bay,” says Sean Farrell, head of digital assets at Fundstrat Global Advisors.

The stakes are high because so much of the crypto industry has a stake in its performance—from exchanges like Coinbase to mining operations, NFT platforms, and stablecoin issuers. “Usually, when you push out a change for a website and it breaks—oh well, it’s not the end of the world. In this case, you can lose a lot of money,” says Katie Talati, director of research at Arca, a crypto-asset manager.

The most immediate effect could be on Ether’s price. Since mid-June, the token has soared more than 50%, while Bitcoin has stayed flat. Both tokens are down about 60% this year, under pressure from rising interest rates and weaker demand for highly speculative tech.

A successful Merge could make Ether ripe for another run, some analysts say. That’s partly because moving to proof of stake should reduce token issuance to about 0.5% a year, down from 4.5% currently. Reducing the issuance could push up the price. “In the current market, supply and demand is relatively in balance,” says Steve Goulden, a senior analyst for Cumberland, the crypto arm of trading firm DRW Holdings. “Post-Merge, there will be a material supply deficit.”

Demand, meanwhile, could get a lift as owners stake their tokens in return for a yield. Investors may earn 4% to 8% by staking, depending on how much revenue the network generates and other factors, according to Talati. Institutional funds with a mandate to invest in environmentally friendly assets could also buy Ether as the blockchain’s carbon emissions become less of an issue.

The upgrade could be a boon to companies like Coinbase. The exchange is developing a service that makes it easy for investors to stake their Ether, with Coinbase taking a 25% cut of any income generated. The staking business has already “grown into a great source of subscription and services revenue and is growing nicely,” said CEO Brian Armstrong on an earnings call in August.

As in any tech upgrade cycle, however, there will be a legacy of obsolescence. Some of the biggest losers in this cycle could be mining companies that spent hundreds of millions of dollars on hardware that might be rendered worthless. Leaders of Hut 8 Mining (HUT), which mines both Bitcoin and Ether, said in August that they were studying how to adapt their Ether mining machines to other tokens or projects. Hive Blockchain Technologies HIVE –1.41% (HIVE), another miner, said a shift to proof of stake “may render our mining business less competitive.”

Chip maker Nvidia looks like another casualty. The company’s graphics chips and cards have been adopted by the industry to mine Ether. But demand now appears to be evaporating. Nvidia, whose stock is already ailing from a slowdown in gaming and other core areas, said on its recent earnings call that it couldn’t predict how reduced crypto mining might hit demand. Analysts for investment bank Baird say The Merge is likely to “generate a wave of mining GPUs [graphics processing units] on the secondhand market, compounding the inventory woes.”

Longer term, Ethereum may pose more of a threat to rival blockchain networks. Blockchains and tokens such as Solana, Avalanche, and Tezos launched with the promise of being faster and more efficient than Ethereum. All run on proof of stake and have established various uses, but if Ethereum pulls off its upgrades, they may run out of time to prove their relevance. “Now that Ethereum has caught up with proof of stake, there’s less of an argument for many other blockchains,” Kassab says.

Some crypto companies aren’t taking The Merge lying down. The threat has led a few miners to launch a competing Ethereum blockchain, called a fork, using the proof-of-work method. The idea is to create an Ether spinoff and a parallel universe of smart contracts, NFTs, and decentralized-finance, or DeFi, applications.

The potential for dueling Ether blockchains is forcing companies to choose sides or declare neutrality. Exchanges like Coinbase, Binance, and FTX say they will apply their usual listing standards to forked tokens and may allow them to trade. Creators of crypto apps such as Uniswap, Compound, and stablecoin USDC have pledged to recognize only the new Ethereum blockchain.

An Ethereum split has some crypto leaders worried that scammers could find new ways to perpetuate theft and fraud. “Somebody’s going to spend 80 real Ether on a fake Bored Ape,” says Robert Leshner, founder and CEO of Compound Labs, a DeFi company. “There will be all sorts of disasters,” he says, advising investors to wait for the kinks to be ironed out and “do nothing.”

Another unknown is how Washington will react. Officials at the Securities and Exchange Commission have indicated that Bitcoin and Ether should be treated as commodities—potentially removing those tokens from SEC oversight. But because many investors will buy Ether with the expectation of a yield, some attorneys believe it could make the token look more like a security. If the SEC agrees, crypto exchanges like Coinbase could be vulnerable to lawsuits or enforcement actions if they let it trade on their platforms anyway.

Changes of this size are an “opportunity to try to distinguish the prior analysis from the current analysis,” says Teresa Goody Guillén, a partner at BakerHostetler and former SEC attorney, who believes that Ether still wouldn’t qualify as a security. The SEC declined to comment.

As with all things in crypto, the hype around The Merge already exceeds the reality. Proponents say it could be the start of a Renaissance of useful apps and services—finally silencing the critics bemused at a multibillion-dollar industry that has yet to find a raison d’être apart from speculation. Conversely, if it flops, it would be another setback for a technology long on complexity and short on real-world utility.

“The most important part of The Merge is the narrative,” Kassab says. “It’s something that everybody is talking about that could bring people back into Web3 and crypto, assuming it’s successful.”

The crypto market is now suffering from a crisis of confidence, having lost $2 trillion in value over the past year and drawn the ire of governments worldwide. A successful Merge may not revive the market or its reputation. But it could make crypto a bit greener, at the least, on its path forward.