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This week in parts. Illustration by Mitchell Preffer for Decrypt.

Ethereum is in bad shape after the week of the merger. The Long-Awaited Transition to a Proof-of-Stake Network Has Happened Thursday as expected. Once done, Ethereum (ETH) fell 8% below $1,500 and continued to decline.

ETH starts the weekend at $1,424, down 17% over the past seven days. It suffered the biggest losses among the top thirty cryptocurrencies by market capitalization this week.

Market leader Bitcoin (BTC) also sank. It enters Saturday 7% lower than it was last week, hovering at $19,788 at the time of writing.

After Ethereum, the second largest losses of just over 10% were recorded by Near Protocol (NEAR), which is trading at $4.24; Avalanche fell to $18.06 and Polkadot fell to $6.87, all of which are so called “Ethereum Killers“, that is, layer 1 blockchains with high-functionality smart contracts.

Ethereum Classic (ETC) is down 12.6% and trading at $34.27. ETC is based on the original Ethereum ledger, which includes an infamous $55 Million DAO Hack which was deleted from Ethereum by vote.

All of the top thirty cryptocurrencies have fallen over the past week, except for the Ripple token XRP, which is up 2%, and Cosmos (ATOM), which is up 3.5%. Cosmos is structurally different from Ethereum in that it is a network of many smaller blockchains, but it also offers high functionality smart contracts.

Ethereum after the merger

On Thursday, Ethereum completed the long-awaited transition from being a blockchain validated by a proof-of-work consensus mechanism – like the one currently used by Bitcoin, in which the miners with the most computing power generate the most coins – to a much more energy-efficient proof-of-stake algorithm – where the miners who stake the most ETH validate the most transactions and reap the rewards.

The transition took place without a hitch. A Crypto Carbon Ratings Institute (CCRI) report commissioned by Ethereum-centric software firm ConsenSys claims that Ethereum consumes approximately 99.99% less energy after the merger. If the number is true, the upgrade has even slightly exceeded Ethereum projections.

However, the merger also resulted in a more centralized Ethereum. According to Martin Köppelmann, co-founder of the DeFi platform Gnosis, Coinbase and the liquidity pool Lido Finance together represent 42% of post-merger Ethereum validatorsand the top seven entities control more than two-thirds of the stake used to validate transactions.

Shipments from Washington

The crypto news from Washington was also not encouraging, although it is unclear if this contributed to the price drop.

During a Senate Banking Committee oversight hearing on Thursday, Republican Senator Pat Toomey gate SEC Chairman Gary Gensler on the regulator’s role in setting the rules for crypto.

Toomey said the SEC failed to help investors when Celsius and Traveler crashed and went bankrupt earlier this year. Both lenders were promising clients high returns on their crypto deposits.

Gensler responded by saying that many companies have not communicated directly with the SEC about listing and selling tokens, and they need to come forward and do so. He also said it was important to have “a cop on the beat” regulating cryptocurrency.

Following a congressional hearing on Thursday, the the wall street journal reported that Gensler said that proof-of-stake cryptocurrencies, which allow holders to passively earn returns through staking, could be qualified as titles: “from a coin standpoint…this is another indication than under the SEC”Howey test“, the investing public anticipates profits based on the efforts of others.

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