The Ethereum (ETH) upgrade, which is due between Stepmber 10-20, 2022, has left everyone unsettled in terms of the kind of effect it will have on the market. The Ethereum Merge event, will reportedly shift the blockchain mainnet from proof-of-work (PoW) mechanism, which is the addition of new transaction blocks to a cryptocurrency blockchain, to proof-of-stake (PoS) mechanism, which validates transactions through randomly selected validators. Insights from reports stated that the merge will address problems around Web3.0 such as absence of an energy-intensive blockchain, and need for enough security and decentralisation. “If the shift takes place according to the plan then it would represent a fundamental overhaul in ETH’s utility. The upgrade would result in a shift from an energy-intensive approach towards a green and environment-friendly approach, with ensurance that the future scalability of ETH will be able to handle more transactions at a lower carbon footprint,” Tushar Gandotra, founder and CEO, FiEx, a cryptocurrency-based startup, told FE Digital Currency.
At the time of writing (8.20am, IST), ETH price stood at $1,575.51 at market capitalisation of close to $193 million, as per data from CoinMarketCap. Experts believe that the upgrade will have an impact on ETH price, as ETH use cases is expected to fall until transaction fee reaches a stable rotational value. “The issuance of Ether is expected to fall by 90% post the merge. As a result, total amount of Ether created to reward miners will also reduce, since running a validator node, which refers to the communication network between miners, is not economically intensive. Staking rewards can rise by 50% from where it currently stands which will be beneficial for long-term investors,” Punit Agarwal, founder, KoinX, a cryptocurrency taxation platform, said.
Moreover, market behaviour suggested that users with ETH-oriented digital wallets may be required to update their nodes so as to keep up with the changes of the merge. “Wallets backed by Remote Procedure Call (RPC) providers, which refers to a software communication protocol for programs to run without any intervention, won’t face any issues as their endpoints are constantly upgraded. Staking to create validators’ network will have to be added to wallets to provide more support to the ETH network. However, I anticipate that funds held by investors will remain unaffected,” Lalit Bansal, CEO, EIY SYS Private Limted, a blockchain consultation company, mentioned.