With the announcement of the Eth Merge, there are a lot of questions. We’ve identified the nine most important things you need to consider about the pending move for your financial portfolio.
1. What is the Ethereum Merge?
The Ethereum Merge is a change in Ethereum’s current consensus mechanism. It is going from “proof of work” to “proof of stake.” The goals are to make it scalable, secure, and sustainable. The transition is expected mid-September.
2. Why is The Ethereum Merge important?
The Merge is so important to the digital currency landscape because it represents a shift towards greater market maturity in the form of new use-cases, accelerated innovation, drastically improved sustainability, faster transaction times, and lower barriers to entry.
3. Makes the Merge So Big for Ethereum Go Forward?
Ethereum is seen as the backbone of Web3. Because so many de-centralized transaction processes, and the businesses behind them, are dependent on Ethereum blockchain technology, the Merge presents a huge opportunity for the mass adoption of this currency, over and above Bitcoin, as this becomes the modus-operandi of the de-fi world.
4. Why Does this Matter to Web3?
With much more market data available, more advanced trading tools, like enhanced algorithmic trading solutions, will become possible, further increasing the credibility of this industry.
5. People Say it’s Risky. What are the Risks and what Should we Expect?
With $200Billion in AUM, the biggest risk of the Merge will be disruptions in the infrastructure that allows this equity to move. If this happens we could see the entire industry screech to a halt. With the Merge very much underway, the risk of this happening becomes less with each passing day.
6. Are there Changes in Ecosystem Incentives?
In terms of the network per se, those with less capital can now become a part of the Ethereum ecosystem because the system no longer requires a huge network of powerful computers to verify transactions, making the network accessible to a much wider demographic. Faster transaction times will also incentivise new businesses to adopt ethereum blockchain technology and simultaneously provide scalability that makes mainstream adoption highly likely.
7. How will Changes in Ethereum Issuance Change the Expected Price?
Slashing the issuance rate is a significant push for expanded use. This is an enormous signal to the market that the efficacy and utility of Ethereum will grow exponentially. It’s a bold statement. It’s a bold bet. It’s a bet many in the Web3 economy are hoping can be delivered. So long term, this is a bullish move – assuming all goes well
8. Will we see Ethereum Inflation or Deflation
We’ve seen instances of deflation already – particularly November to February. And, the reduced issuance might portend to that, but because of the amount of Ethereum already staked vs. current burn rate, we can imagine a future where we will still have a nearly even system. Of course, with many variables like the gwei rate, this might err slightly to deflationary or inflationary.
9. What is the risk of a split/fork between PoW and PoS?
The notion of a hard fork is possible. The very fact that this is a possibility points to the promise of a decentralized ‘revolt.’ That is quite a unique characteristic in DeFi and should be noted as a powerful check and balance in this new economy.
Practically speaking, economic incentives should move everyone to the new ecosystem. The utility, efficiency and developer demands will soon dictate the reality of miners. While there may be short term justification or opportunity to ‘revolt,’ moving to a more efficient, powerful backbone should align incentives and bring miners forward. Net- we don’t see this as a significant or long-enduring possibility.
