Google trends show that search traffic for “Ethereum merger” has never been higher; higher than many other searches like the Solana to INR, and other cryptocurrency conversions. The next step in Ethereum’s (ETH) upgrade is what crypto investors all over the globe want to learn about, which developers have dubbed “the merger”. If this has your interest too, continue reading to learn more about the merge, its importance, and what it means.
What is the Ethereum Merger?
Ethereum is one of the oldest cryptocurrencies on the block. It was the first cryptocurrency to introduce smart contract – technology that makes blockchains programmable. Today, it hosts the majority of applications and projects. Its network is plagued by heavy congestion and high gas fees. Furthermore, it uses as much energy as the entire country.
What’s the solution? The solution is Hive Ethereum, a new engine. It must switch from the Proof-of-Work (PoW) model used by Bitcoin and some other older cryptos to the more sustainable and scalable Proof-of-Stake (PoS) model. It’s not easy to fix a car’s engine when it’s driving down the freeway. But it’s also challenging to upgrade Ethereum’s system, even though it’s still supporting a large part of the decentralized finance industry (DeFi).
Two systems are currently running simultaneously. The Ethereum merge is where the team switches off the older system and allows the new one to run. It recently completed the merger on its final testnet, which is the last stage before the move. Recently, Vitalik Yeteren, the man behind Ethereum, stated at a Denver conference that this would occur in the next few months. If you really want to buy Ethereum in India, make sure you do it before the merger.
What Does the Merger Mean for Ethereum?
Ethereum’s big breakthrough is that Proof-of-Stake (PoS) uses a fraction of the amount of energy as Proof-of-Work (PoW). Some energy experts estimate that Ethereum consumes as much power annually as The Netherlands. The merger will result in a significant reduction in Ethereum’s energy consumption of 99.5%.
The merger won’t solve all Ethereum’s problems. Fortune was told by Tim Beiko, an Ethereum developer, that it will not dramatically lower gas prices. This will not happen until the final stage of Ethereum’s major technical upgrade, due next year. The upgrade to “Shard Chains”, which will make the network more scalable and solve some congestion issues, will reduce transaction fees.
It will reduce Ethereum’s supply. Combining this with the London fork update last year that started to burn Ethereum with every transaction, many predict Ethereum will become deflationary. More Ethereum will be destroyed than will ever be minted. This could have serious implications on Ethereum’s price.
The merger will provide investors with more opportunities to stake their Ethereum and receive rewards. To contribute to the overall robust security and stability of the network, Ethereum holders will need to tie up their coins to participate in the Proof-of-Stake (PoS) validation model. Some investors are already actively doing this on the parallel system. Analysts estimate that staking rewards will double after the merger, leading to better returns for investors.
What does the Merger Mean for Investors?
Many analysts believe that the Ethereum merger is a major deal and could propel Ethereum’s price up to new heights. In fact, Ethereum has risen over 30% in quite recently due to the success of its testnet merger. Ethereum is a solid cryptocurrency project and a significant part of long-term investors’ portfolios. It will be able to compete with cheaper, faster, and more affordable Ethereum alternatives, which have gained significant crypto market share over the past year.
However, there are reasons to be cautious. Cryptocurrencies do not have the same fundamentals that you use to value stocks. This makes the crypto market vulnerable to “Buy the Rumor, Sell the News” phenomenon. The price of a certain event can rise on speculation, but then it falls when it happens.
Media reports implying that the merger will solve all Ethereum’s problems are incorrect. Although the merge will address some problems in Ethereum, it won’t solve all. The reality of the merger may disappoint, just like Cardano’s smart contract did.
What Should Investors Do?
This merger is only one step in an ongoing process that has been in place for many years. Try to be a long-term investor and not buy into short-term hype. It is difficult to predict whether Ethereum will hit new highs that it cannot sustain over the following months. However, if you look at the current Ethereum developments through a 5- to 10-year time frame, it’s less likely that you will be swept away by any price volatility.