The Ethereum(ETH) Merge is Here: What To Expect?
The Ethereum Merge is one of the biggest events in blockchain and cryptocurrency history. It is the process of Ethereum shifting from Proof-of-Work to Proof-of-Stake.
The Ethereum Merge is officially done. The second biggest blockchain has shifted from proof-of-work to proof-of-stake. This move significantly reduces Ethereum's carbon footprint and allows it to scale easily in the future.
Right now, we are in a bear market. One could argue that this was the worst time for the Merge. I believe the opposite. I think that this was the perfect time for the Merge, and it's what the industry needed.
The day of the Merge was calm, with little to no fluctuation. But the days after that have received some pullback. Ethereum is at around $1400 now.
This article will answer a few common questions.
What is the Merge?
Why is it called the Merge if the Ethereum blockchain is transitioning? That's because the Merge combined Ethereum's proof-of-stake consensus layer, beacon chain, with the Ethereum mainnet.
In December 2020, the Beacon chain was shipped separately from the mainnet while Ethereum worked, as usual, secured by proof-of-work.
The Beacon Chain is now responsible for block production. Mining does not exist anymore on the Ethereum blockchain. Instead, anyone with 32 ETH can participate in the network.
Thanks to pools, people with less ETH can also participate by pooling their funds with others.
The Merge is a shift in the way the Ethereum Blockchain validates transactions. In proof-of-work, miners would use large amounts of energy to verify a transaction.
Proof-of-stake, on the other hand, is eco-friendly and more scalable. It picks validators based on their stake in the blockchain.
The Merge has not directly changed much related to gas fees. This is because gas fees are a product of network demand.
But Ethereum is focused on scaling dApps and other implementations with layer 2 solutions such as Polygon. The layer 1 mainnet will be a secure decentralized settlement layer for rollup data storage. It will be optimized to make rollup transactions cost-efficient.
Affect of Merge on Ethereum's Price
While the Merge won't have any short-term benefits because of the bear market, the future has great potential. The Merge has made Ethereum more scalable, which will improve mass adoption.
Staking is now the only way new Ethereum is created. EIP-1559 has also introduced ETH burning. Because of the reduction in supply, ETH could become deflationary as a hedge against inflation.
Outside investors who were wary of ETH's energy impact will now invest in ETH.
Bank of America believes insurance companies might invest their reserves in Ethereum staking.
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