Why Ethereum Merge Is Way Better Than Most Realise
Recently Ethereum migrated from being Proof of Work(PoW) to Proof of Stake(PoS). The event was named “The Merge”.
In this article, we’ll cover what will actually change in the Network and how price can be affected by it, short and long-term.
What Is The Merge, Actually?
To start out let’s go a bit deeper into what the merge actually is.
Put simply The Merge was the fusion between the old and previously proof-of-work Ethereum Mainnet with a blockchain called Beacon Chain. After the event, Ethereum transitioned completely from a proof-of-work to a proof-of-stake consensus mechanism.
According to the Ethereum Foundation, The Merge will reduce energy usage in the network by 99.95%.
Ether Issuance Post-Merge
ETH issuance will also drastically change.
Previously Mining Rewards were around 13,000 ETH/day and Staking Rewards were around 1,700 ETH/day.
Now with The Merge, the Mining Rewards are now completely discontinued and only the staking rewards go on.
It’s an enormous change in ETH’s overall issuance because the emission of coins dropped by 88%~ all of a sudden.
On top of that, around 1,700 ETH are now burned every day. If you add all of those together now Ethereum’s net Inflation is essentially brought to zero.
This alone could be more than enough to justify a potential ETH price explosion within the next 12 to 18 months. It could take a bit longer, who knows? It’s hard to predict the exact date. There are outside factors involved, like the macroeconomy, and unexpected events like wars, pandemics, etc.
But the key takeaway is: The issuance changes are so BIG it will be a surprise if they don’t drive significant price growth for Ether at some point.
It’s basic math. If supply decreases and demand stays around the same levels then the price has to go up.
Similar to what happened in previous Bitcoin Halvings, the pumps can take months, or maybe even more time to occur after massive supply modifications take place.
The website ultrasound.money tracks ETH supply in real-time.
According to their data, there is actually LESS ETH in circulation since The Merge 67 days ago.
Additional reasons why Ethereum could be more attractive to investors(especially institutional) post-merge:
- Not having to depend on the intense energy consumption of traditional mining will definitely make Ethereum more Eco-Friendly. Companies that stayed away from Crypto because of environmental reasons could now be looking at Ethereum as a green-friendly investment so to speak.
- Ethereum usually outperforms Bitcoin in terms of percentage gains. Meaning investors looking for more profits can switch over to ETH, especially if the price starts pumping and draws more media attention. In a potential Bull Run that could easily be the case.
Keep in mind that the Economical Macro outlook is bearish right now. War, inflation, and interest rate hikes are some of the confluences that negatively impact the World Economy in general, so it makes sense that Ethereum isn’t pumping yet. The majority of the risk assets market is red.
Misconceptions about The Merge
Ether’s price not reacting positively to the Merge yet does not mean the Merge was unsuccessful.
Concluding that The Merge did not work out well just because the price didn’t go up immediately after the event misses the point.
Another misconception is to assume The Merge failed because Gas prices stayed almost the same as they were previously. In fact, it was not supposed to lower Gas Fees.
Moreover, The Merge was the first of 5 stages that will take place in the future. Because the Ethereum blockchain is now PoS, the implementation of technologies like sharding becomes possible, and consequently gas cost reduction.
It’s about establishing the setup and laying the foundation. There are still more phases to go in the Network’s development.
For more detail on those phases, they are:
- The Merge (finished)
- The Surge
- The Verge
- The Purge
- The Splurge
@milesdeutscher wrote a great thread on Twitter explaining them:
Final Thoughts
There is much to come on the technological side of things and as the Ethereum blockchain expands more Builders and Developers also find a better platform to construct on.
Whether you are a developer or investor it’s definitely an ecosystem to keep an eye on as crypto evolves.
KEY TAKEAWAYS:
•With The Merge Ethereum migrated from Proof-of-Work to Proof-of-Stake Consensus Mechanism.
•It’s ok Ether’s Price is not pumping yet.
•Ethereum’s token issuance was DRASTICALLY modified after The Merge. Ethereum’s inflation was essentially brought to zero post-merge.
•Ethereum is now “Eco-friendly”.
•The Merge is not the final upgrade. It’s setting up the infrastructure for substantial upgrades in the future.
