- The Ethereum merge is yet to set a historical record in the crypto with the launch early next month
- Investors stand to benefit effectively by consuming less with the Proof of stake consensus mechanism
Ether is the second largest cryptocurrency after Bitcoin with a market cap of over 170 billion. Ethereum is a decentralized blockchain powered by its native currency, Ether. Ethereum powers many initiatives that are important to the cryptocurrency market. it is behind the success of crypto initiatives like decentralized apps (dapps) and decentralized finance (DeFI) .
Ethereum is currently powered by a proof of work (pow) mechanism system. The Ethereum miners earn 2Eth per block within 10 seconds. The merge will shift Ethereum from a proof of work mechanism to a Proof of stake mechanism. The proof of stake consensus mechanism is powered by individuals staking their own coins in exchange of the validation of their transactions. Ethereum’s merge will be beneficial to miners but for them to be certified validators a stake of 32ETH will be required.
BENEFITS OF THE MERGER FOR INVESTORS
The proof of stake mechanism is safer compared to the proof of work consensus. Validators will create blocks when selected by the blockchain and confirmed by a third party. This will help secure the PoS consensus when a new block is addedd to the system. The PoS upgrade will decrease the energy requirements of the Ethereum blockchain .
A large number of environmental investors vouch against the use of PoW as it has a negative effect on the environment. The PoS uses a small amount of energy to secure the blockchains . It is also efficient because it provides fast and innexpensive transactions.
If you are an $ETH HODLer, this article is for you.
Here’s what you can expect from the upcoming #Ethereum merge and how you can prepare for it.https://t.co/543Z5IC2ws
— Binance (@binance) August 19, 2022
EFFECTS OF THE MERGE ON SUPPLY
Rewards will be distributed in Ether in depending on the validator’s stake. The more Ether that is staked, the greater the chance of being selected by the network. When a validator is selected by the network, that investor will earn rewards through transaction fees and transferred to respective accounts
In the previous fiscal years, Ethereum had a much higher inflation rate compared to Bitcoin. With the planned upgrade, the fundamentals of Ethereum are changing for the better. The dramatic decrease in the total supply of ETH is having apositive change on the second largest cryptocurrency .
The Ethereum merge will decrease the total ETH supply and provide token holders with an opportunity to stake their tokens. Because of the expected yield generated through staking, it is likely that the total market interest in Ethereum will increase as an investor can participate in income generation by holding their ETH. A decrease in the total supply of ETH will likely be seen as a positive change to the second largest cryptocurrency.
INCREASED PARTICIPATION IN THE ETHER MARKET
For a miner to successfully mine a PoW blockchain one has to make a significant capital allocation to the project. Running a PoW mining operation is cost-intensive, requiring the purchase of hardware, and power-supply upgrades. The transition from PoW to PoS will reduce the capital burden needed to secure Ethereum. This will allow individuals to venture into the market confidently and help secure the network.