Far-reaching implications of the Ethereum merge
ETH merge PoW and Pos by UKBTC Automated Trade Marketplace
London, United Kingdom, 20th Aug 2022, Merge is considered one of the biggest events in crypto history since the birth of Bitcoin. No blockchain has changed so drastically in the history of cryptocurrencies. The beacon chain is an empty chain that can be integrated with the Ethereum blockchain to replace the PoW mechanism of Ethereum without caring about any other variables. Once the two chains merge, Ethereum’s PoW verification will be replaced by a brand new PoS consensus mechanism. (UKBTC Automated Trade Marketplace)
Ethereum can be said to be the largest and most secure system in the field of encryption in the entire economic ecology. The security of all these economic activities will be transformed from a pow-based economy to a pos-based economy. Therefore, mistakes are definitely more risky, which is one of the main reasons why this merge took so long, because there is a lot of testing and refinement involved. The planned merge upgrade on the Ethereum blockchain, moving it from a proof-of-work (PoW) system to a greener proof-of-stake (PoS) mechanism, will have many consequences. These include reducing energy intensity, the transition to deflationary assets, and a “potential roadmap for a more scalable future through sharding.” (UKBTC Automated Trade Marketplace)
The merge will have a huge impact on Ethereum’s economy, especially for investors. The merge will change the economy of Ethereum in two ways. Reduce the issuance of Ethereum and use Ethereum as a native yield asset. The merge is the first of five planned upgrades to the network, which could increase transaction speeds by as little as 10% by reducing block times. The upgrade, however, paves the way for “Surge,” the network’s next planned upgrade, the merge that will reduce annual ETH issuance from 4.3% to 0.43%. This is because the PoS consensus mechanism has been fundamentally improved. PoS is designed to provide the highest level of blockchain security at the lowest cost, and by reducing the amount of ETH that is issued to maintain security, these saved amounts of ETH are more beneficial to Ethereum. Switching from PoW at the same time will reduce the overall issuance of ether by 4.2% per year, and as ether (ETH) eventually becomes deflationary, this may improve the token’s situation as a store of value. (UKBTC Automated Trade Marketplace)
The move to PoS turns ETH into a form of income for the network. Having the underlying cash flow would allow for a range of valuation methods not currently available for blockchain. Since Ethereum is both yielding and deflationary, it is unlikely to be the highest throughput blockchain. Given its “enhanced store of value properties,” it is more likely to be a place where more and more total locked value is protected and traded.The merged ETH currently has $11.4 million in ETH pledged, with an annualized rate of return of 4.6%. This ETH-denominated benefit comes only from staking rewards. In PoS, stakers will also receive Gas fees that now belong to miners, which will increase APR by a factor of 2 or more. (UKBTC Automated Trade Marketplace)
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