Ethereum, if Bitcoin is the cryptocurrency gold standard in the crypto world then Ethereum should be considered the digital silver. Since its 2015 foundation, Vitalik Buterin’s blockchain powerhouse has been a huge success. On several occasions its price has exceeded that of Bitcoin.
The price of Ethereum soared from its initial value of less than $1 to over $4,800 in the last year. This was some of the biggest Ethereum news, but 2022 has marked a major landmark in this cryptocurrency’s journey: The merge!
There are many exciting aspects to this merger, including the ability to change price predictions and transform trading. Today, we’ll look at how it will change things and cover everything you need to know. What is The Merge exactly?
What is the Ethereum Merge?
The Ethereum Merge has been a long-awaited upgrade of the digital framework of the world’s second-biggest cryptocurrency that an inefficient energy-sapping system has long been plagued by.
By swapping proof-of-work (PoW) for proof-of-stake (PoS), a seriously difficult and time-consuming task like a digital version of switching the engine of a car, Ethereum has now achieved energy efficiency and can class itself as one of the few environmentally-friendly cryptocurrencies that now consumes around 99.9% less energy.
According to Digiconomist, this transformation amounts to Finland shutting down its power grid.
And it’s not just energy efficiency that The Merge will bring. The team behind Ethereum claims that the Ethereum network’s transition from proof of work to proof-of stake will increase security and scaleability. This platform is currently home to over $60 billion in crypto exchanges and lending companies.
“If you’re investing in Ethereum or any kind of blockchain technology, you’re investing in something in its early days. You’re going to need a long-term time horizon to see how things evolve. I really don’t think there’s a lot that folks who own Ethereum should be doing at this point.” – Doug Boneparth, financial advisor.
Many people, however, are still skeptical about crypto and eager to learn how The Merge will fare in the coming months. Are these the keys to bright futures for Ethereum? Or is this just hype? How will it affect the price of Ethereum going forward?
To answer this demand for answers, let’s delve into five ways that the Ethereum merge can affect trading and the wider world of cryptocurrency.
Could The Merge Protect Ethereum from Hackers?
Cryptocurrency is very lucrative and is an attractive target for hackers. Crypto hacks are expected to increase losses by up to 60%, reaching $1.9 billion in 2022. People are naturally curious to learn if The Merge will make Ethereum’s network safer against hackers.
There will be weaknesses to the blockchain that hackers can exploit. The Merge, however, has made significant advances in securing Ethereum. The cost of validating transactions on Ethereum Blockchain is 33 Ethereum, which amounts to around $55,000.
The initial investment can be a major barrier to hackers trying to access the network. There is no guarantee they will succeed. It is possible to increase trustworthiness by purchasing Ethereum on reliable platforms like Coinbase or Gemini. This will help to minimize the chance of being scammed.
Is it possible for more people to use the Ethereum Network now?
It is popular because those using the Ethereum network can get rewards by participating in the network and thereby secure the Ethereum network. The Merge means that rewards have become more available for more users, since there’s more space to do so.
After the switch to proof-of-stake (PoS), miners can no longer verify transactions on Ethereum. Instead, the validations of transactions are done through the staking process. Users who have Ethereum tokens may now be able to stake some of these tokens in order to verify transactions and protect the Ethereum network. Users are awarded a small fraction of transaction fees in return.
To be successful in mining, which is a complex and costly operation to operate, you need advanced computer knowledge and equipment. For many, this was a problem. Staking, however, is not only beginner-friendly, it’s cheaper to start with and much more straightforward to get involved and reap the benefits.
Not only the Ethereum blockchain, but also various popular platforms such as Lido Finance or Coinbase offer an easy way to stake Ethereum via automated processes. The APY rates on major platforms currently range between 3% to 3.8%.
Understanding how Ethereum stakes is crucial if you want to be able to trade your Ethereum. Once you stake, you’ll be unable to trade your staked amount for a pre-agreed period of time. However, if you’re a long-term investor, this is no issue.
The interest rates offered for Ethereum stakes after The Merge offer a vastly better return than conventional dividend stocks. The Merge gives Ethereum holders the opportunity to generate a passive income stream. Another reason to buy Ethereum is that it offers a passive stream of income, which will drive even more people to it.
How will energy efficiency affect Ethereum?
Since long, the environmental effects of crypto currencies like Ethereum have hindered their ability to scale. With The Merge, Ethereum will use 99.9% less electricity, which is a significant boost for its sustainability and key to wider adoption.
Ethereum’s transition to proof-of-stake is a signal to regulators that the cryptocurrency market can be regulated and adaptable to future needs. It also demonstrates its commitment to planet preservation.
The White House Office of Science and Technology Policy (OSTP), recently conducted an extensive report about the Climate and Energy Implications of Crypto-Assets In the United States. It showed that mainstream adoption of cryptocurrencies has been increasingly taken into consideration by government at all levels.
Many people hope that the Ethereum Merge will result in more collaboration between the cryptocurrency industry and governments around the world, which could have a hugely positive impact on the overall price of crypto.
Are Ethereum Gas Fees Going to Fall After the Merge?
Gas fees is one of the major drawbacks of Ethereum. Gas fees are an obligatory cost associated with transactions on the Ethereum network. They are paid using Ethereum’s native token of ETH and often rise dramatically if there is an increased demand for processing transactions.
Gas fees can rise to hundreds of Dollars during peak traffic times on Ethereum Blockchain. This can make it very inefficient. Many people wonder if the Merge will reduce these gas fees.
Is the answer yes or no? The answer is yes and no. Although gas fees will be lower in the future, they are not expected to drop immediately. The transition to proof-of-stake won’t expand Ethereum’s network capacity, which is needed to lower gas fees.
However, the Ethereum network is implemented a Layer 2 technology called roll-ups; This effectively “rolls up” a wide range of transactions off of the Ethereum blockchain, processes them, and then subsequently records a smaller, compressed version on the main Ethereum blockchain. The Merger will be essential in implementing this technology.
How will The Merge Impact The ETH Price for Investors?
We now reach the crucial question: How will The Merge impact investors like yourself? While many of you might have initially been disappointed by the drop in price of ETH after The Merge’s announcement, others expected the exact opposite.
However, it’s important to remember that the effects of The Merge will not be immediately made apparent. Ethereum will not immediately become fast with low transaction fees. It will be gradual over the coming months and years.
All these positive upgrades to Ethereum can attract more investors, bringing the supply of ETH down and positively affecting the price of Ethereum’s native token.
Ending Note: The Future IS Bright, and The Future Is Mixed!
Let’s sum it all: The Merge serves as the foundation of Ethereum’s future. High speeds, low fees, and environmental efficiency are all reasons why The Merge is a good foundation for an Ethereum bullrun.
Ethereum may now be primed for new institutional investors who prioritise environmental, social, and governance (ESG) practices but have been dissuaded in the past due to Ethereum’s high energy consumption. The Merge has made Ethereum an eco-friendly and energy-efficient asset.
It’s clear that some majorly positive changes are coming to the Ethereum network. However, much will not change in The Merge’s initial stages. For now, at least. Ethereum has had a 600% return on investments over the past five year. Is this number likely to increase in the future? We will only know the truth when it comes to this.
The Merge’s benefits will make Ethereum a brighter future. As with all cryptocurrency, there is no guarantee. Always invest responsibly and seek out the advice of a licensed financial advisor if you’re investing in cryptocurrency for the first time. The volatility of digital currency trading is high and it’s not something that should be done by all.