The Ethereum Merge: What Is Trading Headed Towards?
September 28 2022 - 12:48PM
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If Bitcoin is the digital gold of the crypto sphere, then Ethereum
is the digital silver. The blockchain powerhouse headed by Vitalik
Buterin has taken the world by storm since its foundation in 2015,
and its price journey has outperformed BTC on several occasions.
From its starting value of just under $1, the price of Ethereum
surged to more than $4,800 last year. This was some of the biggest
Ethereum news, but 2022 has marked a major landmark in this
cryptocurrency’s journey: The merge! The merge is seriously
exciting, from overhauling price predictions and revolutionising
trading to taking Ethereum into the future. Today, we’ll look at
how it will change things and cover everything you need to know.
But first, what exactly is The Merge? 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. To put this into perspective, this
transformation is equal to the country of Finland closing down its
national power grid, according to Digiconomist. And it’s not just
energy efficiency that The Merge will bring. According to the team
behind the Ethereum network, the transition from proof-of-work to
proof-of-stake will lead to more security and scalability for the
Ethereum platform, which is home to more than $60 billion worth of
crypto exchanges, lending companies, and non-fungible token (NFT)
marketplaces. “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. But amongst the ever-sceptical crypto community,
many people are eagerly eyeing up The Merge and are keen to see how
it will perform in the next few months. Is this the key to a bright
future for Ethereum, or is it all just hype? Most importantly, how
will it impact the price of Ethereum in future? 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. Can
The Merge Secure Ethereum Against Hackers? There is a lot of money
involved in crypto, and the blockchain is a prime target for online
hackers. In 2022, losses stemming from crypto hacks have
skyrocketed by 60% to a staggering combined value of $1.9 billion.
Naturally, many people are keen to know if The Merge can make the
Ethereum network more secure against hackers. The blockchain will
always have weak spots for hackers to take advantage of; The Merge
has arguably made advances to secure the Ethereum network. For
example, the cost to validate transactions on the Ethereum
blockchain is 33 ETH, or around $55,000. This initial investment is
a significant barrier for hackers to gain access to the network,
with no guarantee that their attack will be successful. However,
what can be a step towards higher trustworthiness is to always look
for purchasing Ethereum from reliable trading platforms such as
Kucoin, Gemini, Immediate Edge or Coinbase just to limit the
exposure to scams as much as possible. Can More People Use The
Ethereum Network Now? One of the most popular aspects of the
Ethereum network is that those who use it can earn rewards through
their participation in the network, thereby securing it in the
process. Following The Merge, the rewards opportunities are now
open to more people as there is much more room for new users to use
the network now. Following the transition to proof of stake (PoS),
miners no longer validate transactions on the Ethereum blockchain.
Instead, validations are carried out through the staking process.
This means that users who hold Ethereum tokens can now stake some
of them to validate transactions and secure the Ethereum network.
In return, users are rewarded with a fraction of the transaction
fees. Mining, an intense and expensive to run operation, required
advanced computer equipment and knowledge to be done effectively.
This presented a barrier for many people. Staking, however, is not
only beginner-friendly, it’s cheaper to start with and much more
straightforward to get involved and reap the benefits. As well as
the Ethereum blockchain itself, various widely used platforms like
Coinbase, Lido Finance, and some platforms available through
services like Immediate Edge offer the chance to stake Ethereum
simply via an automated process. APY rates are currently between 3%
and 3.8% on most major platforms. If you wish to stake your
Ethereum, fully understanding how the staking process works
beforehand is important. 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. Compared to
traditional dividend stocks, the interest rates awarded for staking
Ethereum after The Merge are vastly superior. It provides the
chance for Ethereum holders to earn a passive stream of income
automatically. Thus, it presents another good reason to own
Ethereum that will likely drive more people to invest in it. How
Will Energy-Efficiency Affect Ethereum? The environmental drain of
cryptocurrencies like Ethereum has long hindered their scalability.
However, The Merge will now see Ethereum use around 99.9% less
energy, a huge boost to its sustainability and the key to more
widespread adoption. Through its transition to proof of stake,
Ethereum is sending a message to those seeking to regulate the
crypto market that it can adapt to the future and place the
preservation of the planet at the forefront of its foals. Recently,
the White House Office of Science and Technology Policy (OSTP)
conducted an in-depth report on the Climate and Energy Implications
of Crypto-Assets in the United States, showing that mainstream
adoption of cryptocurrencies is becoming increasingly considered by
the highest levels of government. Many are hoping that the Ethereum
Merge will only lead to more research and collaboration between the
crypto industry and global governments, which will hopefully have a
massively positive effect on the value of crypto overall. Will
Ethereum Gas Fees Lower After The Merge? One of the biggest
drawbacks of the Ethereum network is the Gas fees. This is the
obligatory fee that comes with any form of transaction carried out
on the Ethereum blockchain. They are paid using Ethereum’s native
token of ETH and often rise dramatically if there is an increased
demand for processing transactions. At some of the highest traffic
periods on the Ethereum blockchain, gas fees can surge to hundreds
of dollars. As a result, it can be completely inefficient for many.
So many people are questioning if The Merge will lower these Gas
fees. The answer? Yes, and no. Gas fees are predicted to lower in
future, but not straight away. 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. To realise the introduction of
this technology, The Merger is vital. How Will The Merge Affect The
ETH Price For Investors? Now, we reach the most important question:
How will The Merge affect investors like you? Many of you may have
been initially disappointed to see the price of ETH plummet after
The Merge, as many people expected the complete opposite. However,
it’s important to remember that the effects of The Merge will not
be immediately made apparent. The Ethereum network will not become
high-speed with low transaction fees straight away; it will take
place over the next few 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. In Conclusion: The Future Is Bright, The Future Is
Merged! And so, to sum up: The best way to explain The Merge is as
a foundation for the future of Ethereum. From high speeds to lower
fees and overall environmental efficiency, The Merge results have
the potential for an Ethereum bull run sometime soon. 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.
Following The Merge, Ethereum is now an energy-efficient and more
environmentally friendly asset to own. It’s clear that some majorly
positive changes are coming to the Ethereum network. But a lot will
stay the same in the early days of The Merge. At least, for now.
Over the last five years, Ethereum has provided a return on
investment of 600%. Will that number be surpassed in the coming
months? Only time will tell. The future of Ethereum looks bright
following the benefits that The Merge can bring. But as with any
cryptocurrency, nothing is guaranteed. Always invest responsibly
and seek out the advice of a licensed financial advisor if you’re
investing in cryptocurrency for the first time. Trading digital
currencies can be highly volatile and are not recommended for
everybody.
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