Crypto wonks are waiting for “the merge” in which the current Ethereum Mainnet will merge with the Beacon Chain proof-of-stake system altering the whole Ethereum ecosystem. The merge is taking place from mid-September this year after being discussed more than 8 years ago. The Ethereum network is considered a technological pillar for other altcoins with 2970 projects built on it, more than 71 million accounts with an ETH balance, and crypto applications operating using Ethereum have a total of more than USD 50 billion in user funds. Ethereum is a public ledger where exchanges of digital currencies are recorded, and transactions on the blockchain are done in Ether. With the Merge’s news, Chicago-based derivatives exchange CME Group announced that it is preparing to offer options on Ethereum futures after the Merge.
The main concerns about the proof-of-work consensus mechanism are consuming a huge amount of energy, and being slow and expensive. However, the merge will reduce energy consumption by 99.95% of the second biggest cryptocurrency by market cap as the complex mining process for the proof-of-work will not be required anymore to create blocks. Instead, only proof-of-stake validation will be used which can be done using any normal laptop fulfilling the plan of becoming more scalable and sustainable. Converting to proof of stake may also assist in alleviating another of Ethereum's major issues: the high fees necessary to access the network. Because Ethereum can only manage a certain amount of activity at once, the cost of utilizing it rises when there is a high demand for the platform. Anyone transferring Ether must pay a "gas cost," which has climbed to as much as $200 at times. The Merge will not instantly solve that problem, but engineers argue it will establish the framework for future enhancements meant to reduce the fees. However, the merge might leave the chain more vulnerable to high jacking.
Some experts think that this transition will cause a decrease in the currency’s price as it would be less costly to create new ETH by staking pre-existing ones; hence, less expensive. However, the shift to PoS will cause the supply of ETH will decrease by around 80% to 90% due to the “burning” process; thus, causing a deflationary pressure on the chain which is almost equivalent to a threefold halving of the network, and eventually, the demand for ETH for will increase significantly.
While others believe that the Merge would work as a stimulus for ETH's price to rise, the currency is still a long way from its highs due to the recent market-wide collapse in crypto pricing. Despite a recent recovery, ETH is currently valued at roughly $1,575.7 falling 67% short of its all-time high.
Mining firms are the most affected by the news to the extent that miners are now working on creating an alternative currency to compete with the newer version of the Ether. A recent report by Hive Blockchain, a mining company, stated “a switch may render our mining business less competitive or less profitable”.
As an Ethereum investor, you need not worry about your ETH as the transactional history of the cryptocurrency will still exist without any alterations, as per Euthereum Developers.
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