Home Ethereum Ethereum upgrade could increase Ether’s market value ahead of Bitcion’s

Ethereum upgrade could increase Ether’s market value ahead of Bitcion’s

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Ethereum upgrade could increase Ether’s market value ahead of Bitcion’s

The blockchain behind the second-largest cryptocurrency, Ether, will soon undergo a much-anticipated upgrade that could lead to more institutional investors putting money into the network and driving up the price of Ether.

Currently, Bitcoin is the largest cryptocurrency by market value at over $804 billion. But Ether, with a current market capitalization of over $360 billion— could become the leader after the infrastructure upgrade called the ‘merger’.

Although a timeline is yet to be set, industry watchers have speculated that the “merger” could arrive this summer. Investors are already bet on itand there is a lot of money at stake.

In addition to powering Ether, Ethereum has been adopted by decentralized finance (DeFi) applications and non-fungible token (NFT) projects, so an upgrade could significantly improve its valuation.

Switching to Proof of Stake will result in 99% less power consumption

Ethereum currently relies on what is called proof of work in which miners must solve complex puzzles to validate transactions and create new coins. This process requires enormous computing power and is often criticized for its environmental impact.

With the planned upgrade, Ethereum is moving to proof-of-stake, which would allow users to validate transactions based on the number of coins they contribute or stake. In exchange for staking more coins, users have a higher probability of being chosen to validate transactions on the network and earn a reward.

Currently, Ethereum has both a proof-of-work and proof-of-stake chain running in parallel. While both chains have validators, only the proof-of-work chain currently processes user transactions. Once the merger is complete, the Ethereum blockchain will switch entirely to the proof-of-stake chain, called the Beacon Chain, making mining obsolete.

As a result, it is expected that the power consumption of Ethereum will be reduced 99%. Due to the reduced impact on the environment, it is believed that more institutional investors will want to buy Ether, use its blockchain, invest in its network and create greater adoption.

Ethereum Developers successfully tested the change last week as part of the final preparations for the merger, which added to the bullish sentiment surrounding the potential for the upgrade.

Although the merger was supposed to take place months ago and was delayed, Ethereum developer Tim Beiko told Bloomberg that “it would take a catastrophic event for that not to happen this year”.

Ether issued is estimated to fall ‘90%’, which could increase its price

Ether supply is also expected to decrease after the “merger” as fewer coins are expected to be issued.

“Post-merger, the amount of ETH issued is expected to drop by 90%, leading to similar fee levels to reduce Ether supply by up to 5% per year,” the blockchain analytics firm said. . InTheBlock writes in his newsletter.

If demand increases while supply decreases, the price of Ether may increase. But it is impossible to predict the future price of an asset.

Since implementing another major update in August, Ethereum has already burnedor destroyed, $5.9 billion value of Ether, according to data dashboard watch the burn. Although this August upgrade is unrelated to the merge, it does show that the issuance of new Ether has already slowed down. After the merger, some think Ether can become a deflationary asset, or one with a falling supply that can be used as a store of value. Bitcoin is already considered such a safe haven.

Staking yields are estimated to cause high yields

As part of proof-of-stake, validators will “stake” or contribute their Ether to crypto wallets. Fees that were typically paid to miners for their efforts in the proof-of-work model will turn into something of a passive income for validators under the new proof-of-stake, as mining becomes obsolete.

“Through the merger with the proof-of-stake chain, fees previously collected by miners will be transferred to those who stake. This should translate to staking rewards between 7% and 12%,” IntoTheBlock reported.

But critics are skeptical fusion”

Although most of the Ethereum community is excited about the “merger”, some have expressed concern.

Alyse Killeen, founder of Bitcoin-focused venture capital firm Stillmark, said on Twitter: “Ethereum is in it. a lot. difficulty… providing security is getting harder and harder [and] Stronger.” She argues that proof of stake is less secure and makes Ethereum more vulnerable to attacks.

But this review “just seems very anti-Ethereum without a lot of extra substance,” Beiko said. Fortune. He said moving to proof-of-stake would actually improve security against potential hacking.

“Under proof-of-stake, if an attack occurs, we can simply upgrade the network to remove the attackers’ coins,” he said.

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