7 Things That Will Happen to Ethereum After the Merge

0
110
7 Things That Will Happen to Ethereum After the Merge
7 Things That Will Happen to Ethereum After the Merge

After several months of postponements and altered schedules, a significant Crypto event is soon to take place. The second-largest cryptocurrency, Ethereum, is fundamentally altering how it builds and operates its system in order to become more scalable and energy-efficient.

More than usual, the Ethereum community is ecstatic. Ethereum engineers have been rejoicing—even singing—during weekly Zoom conversations devoted to technical issues as they move closer to the “merge,” which has been touted as the most significant technological advancement in the history of cryptocurrency.

When the present Ethereum mainnet proof-of-work (PoW) protocol “merges” with the Beacon Chain proof-of-stake (PoS) blockchain technology, it will remain as PoS.

What does that mean for Ethereum in a world after Merge? The Merge has been viewed by many as the network’s grand conclusion.  However, Buterin stated that Ethereum will now focus on “the Surge, the Verge, the Purge, and the Splurge.”

What is the Ethereum Merge?

Although the project has gone by various names in the past (Ethereum 2.0, Eth2, ETH 2.0…), the Ethereum community decided on “merge” early this year.

The Merge is a long-awaited upgrade to the Ethereum system that switches it from an inefficient proof-of-work protocol to a proof-of-stake configuration that is thought to be significantly more effective. The blockchain system, which controls and records each cryptocurrency transaction, can be used in either of these two ways.

The main variations between the two are as follows:

  • Proof-of-work cryptocurrencies rely on “miners” to create cryptocurrency coins by solving challenging mathematical problems with power-hungry graphics cards.
  • A cryptocurrency that uses proof of stake relies on its owners, or stakeholders, to approve transactions. Stakeholders who take this action may be rewarded.

Simply said, the merge represents an update to Ethereum’s network that has been long anticipated. Although such updates are routine, this one is particularly significant since the success of it will allow programmers to add a variety of additional capabilities to the network.

The cryptocurrency will continue to use the proof-of-work methodology when it switches to Ethereum 2.0, but the new Beacon Chain system will record transactions using the proof-of-stake protocol.

Read more about the merge here: https://fxcryptonews.com/153000-ethereum-added-to-eth-2-0-as-investors-anticipate-merger/ 

Ethereum Merge: The 5 Stages For Future Development

Vitalik Buterin, the company’s co-founder, discussed his expectations for Ethereum after the PoS switch at the recently concluded Ethereum Community Conference in Paris. One of the significant benchmarks Ethereum has established for the Merge is scaling. 

According to the CEO of Ethereum, the upgrade would enable the blockchain to perform 10,000 transactions per second. The team has identified five milestones for its future developments, the first of which is the Merge. The five phases consist of:

  • The Merge: Here, the emphasis is on the switch from proof of work to proof of stake. It describes how the Mainnet of Ethereum and the Beacon Chain came together.
  • The Surge: The group hopes to incorporate sharding into the protocol in the later stages. The main network will be split up into smaller units known as shards as a result of this scalability approach. The method will reduce the computational load now placed on the mainnet.
  • The Verge: The idea of “verkle trees” is introduced at this phase. Upgraded Merkle proofs are included. The phase will aid ETH node operators in having more data storage space.
  •  The Purge: It has to do with validators’ data storage. The upgrade will work to reduce the amount of hard drive space that the validators need. The procedure will aid in clearing up network congestion.
  • The Splurge: This last upgrade aims to bring a series of enhancements that will improve the network’s general usability.

Why does the merger matter so much?

For starters, Ethereum underpins Ether, the second-largest cryptocurrency with a $202 billion market cap, making it the most widely utilized blockchain. Numerous decentralized apps (dApps) and decentralized finance (DeFi) protocols are also hosted by Ethereum, which also validates the validity of millions of non-fungible tokens (NFTs).

The cryptocurrency system will gain from the modifications to the Ethereum protocol in a variety of ways, including increased efficiency and scalability, which will strengthen the platform. 

Due to the way it encourages hoarding, it may also increase the value of the Ethereum token. Additionally, the shift may, at least temporarily, cause problems in other industries, such as the production of graphics chips.

You won’t need to take any action if you possess Ethereum to take part in the transition. You might not even notice the technological changes because everything will be handled behind the scenes.

The conclusion of the merger will have an impact on a large number of businesses and services that depend on the Ethereum blockchain in addition to that platform itself. 

Given Ethereum’s scale and significance, the outcome of the merger will probably have repercussions for the larger cryptocurrency sector.

7 Changes That Will Happen to Ethereum Following The Merge

Energy Reduction

The reduction in energy use for Ethereum is one of the most significant advancements. And this is an area where cryptocurrencies have received harsh criticism (justly so), as the proof-of-work methods, which are still utilized by Bitcoin, need astronomically high energy consumption. 

However, according to the managers of the cryptocurrency, Ethereum’s energy consumption will drop by around 99.95% if it switches to proof of stake.

Strong Crypto Ecosystem

According to analysts, the modification also strengthens the cryptocurrency ecosystem. According to Ginzburg, “theoretically, the Merge will make Ethereum more effective and faster, with reduced processing times during high network traffic.” “At speed and scale, increased frequency and higher volumes of transactions will be conceivable.”

Greater efficiency and scalability 

Ethereum’s commercial partners may find it more useful if it is more effective and scalable. As a result, Ginzburg predicts that “mainstream payment networks and processors, finance and asset exchanges will experiment more aggressively putting their businesses on the chain.”

Ethereum Valuation

The value of Ethereum 2.0 may potentially be significantly impacted by The Merge, which is something traders are extremely interested in learning about. 

According to Aaron Samsonoff, chief strategy officer and co-founder of InvestDEFY, a producer of structured crypto products, “Ethereum is positioned to become deflationary following the Merge.” After the shift, he predicts that the issuance of new Ethereum tokens will fall by about 90%.

Rising Staking Rewards

As a result of decreasing supply and stable or increasing demand, a deflationary currency will often appreciate in value. The price of Ethereum may also be under pressure from other supply problems. 

Samsonoff anticipates increasing staking benefits for individuals who stake their coins, which will result in more coins being retained for investment and a reduction in supply. Additionally, he predicts increased institutional interest in Ethereum. When you add it all together, it seems to suggest that the value of digital money will increase.

Market Preference

However, if merchants and other parties continue to favor the outdated protocol, a rising price is not a guarantee. The key question, according to Ginzburg, is how the market will react to the fork. 

Will users appreciate the original chain more highly or the new 2.0 chain more highly? Naturally, we think 2.0 will be preferred by builders, but what about traders? Miners?”

Significant Shift in Graphics Cards 

Graphics cards, which are essential to the proof-of-work protocol, may undergo significant change as a result of the switch from proof of work to proof of stake. According to experts, Ethereum miners will flood the market with their graphics processors, which will cause prices to drastically fall.

Misconceptions related to The Merge

The following are the most popular misconceptions regarding The Merge that float around the crypto space:

  • Falling Gas Prices 
  • Increased Transaction Speed
  • The Merge will result in network downtime.
  • Following the Merge, all Staked ETH will be removed.
  • To run a node on the network, you must stake 32 ETH.

Conclusion

The second-largest cryptocurrency network in the world, Ethereum, stands out. The global crypto industry will undoubtedly be impacted by any changes to its ecosystem. 

Because of this, the Merge is regarded as one of the most significant industry advancements that will completely alter Ethereum’s working paradigms.

The majority of the Ethereum community is solidly in favor of the merger, while a vociferous minority is calling it a grave error. Despite the fact that some of this opposition stems from self-interest—specifically, miners worried about lost income—there are also ideological issues.

Ethereum 2.0 is major news for the cryptocurrency community, but whether Ethereum gets embraced more broadly for practical purposes as opposed to only serving as a trading platform is the key determinant for investing in cryptocurrencies.