ethereum: Ethereum’s Merge: The much anticipated move in the crypto landscape
They believe that this will pave the way for “the flippening” – when Ethereum overtakes Bitcoin as the largest cryptocurrency measured by market capitalization. September is here and the merger is just weeks away. Let us understand the event in detail and prophesy what is ahead.
What is the merger?
The merger is the transition from the Ethereum (ETH) blockchain to the Proof-of-Stake (PoS) consensus mechanism. This shift was planned at the inception of the blockchain in 2014. PoS is energy efficient, and the merger will immediately cut 99 percent of Ethereum’s carbon emissions, according to the Ethereum Foundation.
This would make ETH a strong contender for institutional investors like Tesla who have stayed away from Bitcoin (BTC) due to concerns about energy usage. It will also have implications on the tokenomics of ETH. The merger will result in a net drop of 90 percent in the annual issuance of ETH.
This means that over time ETH’s supply will remain stable (or even decrease, making ETH deflationary) and gives investors a bump. All retail investors will also be able to stake their ETH for passive rewards once the merge is successful.
However, this step will not solve transaction speeds or drastically improve the volume of transactions on the blockchain. To address scalability, there are four additional steps in the Ethereum roadmap (Surge, Verge, Purge & Splurge) once the merger is complete. The above scenario, if played out well, could lead to ETH gaining on BTC in the medium term and eventually hitting the ratio of 0.17 and above, which would lead to “the flippening”. Ethereum will then be the most sought-after crypto-asset in the world.
It’s all rosy, but short-term effects must be negotiated
Current Ethereum miners who have invested in hardware and their efforts to successfully run the blockchain over the years are naturally unhappy. There are calls to create a new fork that will retain the PoW mechanism of the blockchain. This will be similar to Ethereum Classic which split from Ethereum’s main chain in 2016 and continues to be a top 20 cryptocurrency.
There is also a small chance that the merger could be delayed or fail, given the huge changes expected in the ecosystem. Thus, in the short term, the merger may lead to high volatility in ETH prices depending on its success and results.
Investors need to be patient and profit for the long term.
The merger is an automatic process. Investors should only hold Ethereum on a wallet or exchange that supports the merger and any new forks in order to emerge unscathed
All coins will be automatically transferred to the new blockchain, while any new fork coins will also be issued to the investor. NFT holders on Ethereum, meanwhile, are encouraged to hold their NFTs in private wallets.
It will indeed be a memorable September if the merger is successful. While ETH and crypto may not be immune to macroeconomic conditions globally, they will at least be on a path to sustainable growth and scaling in the future. The merger may be the starting point for this adoption curve.
(Vikram Subburaj is the CEO of Giottus Crypto Platform)
