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The long-awaited integration of Ethereum, the most prominent altcoin and second-largest crypto by volume is finally going to be completed.
After dominating the smart contract blockchain market for many years, ethereum will switch to a less energy-intensive technology as a result of the network upgrade. The Ethereum foundation has been calling the upcoming improvements “Ethereum Merge” for months, even if you may have previously heard of them as Ethereum 2.0 or Eth2.
Industry experts have been keenly monitoring each development leading up to the upgrade because they believe it might substantially change the value of the second-largest cryptocurrency.
Before we move on to what it means for crypto investors, let’s read about the benefits of the Ethereum Merge.
Benefits of Ethereum Merge
The Ethereum Merge will overshadow all the risks.
Firstly, the Merge is predicted to reduce Ethereum’s energy consumption by 99.9%, which might skyrocket blockchain’s popularity. It’s not just about crypto; a less energy-intensive user interface can persuade cautious, eco-conscious people to use Ethereum for DeFi projects, NFTs, and other things.
In the long run, moving to proof-of-stake might also enable Ethereum to reduce its often expensive transaction fees. Of course, the Merge won’t resolve the problem on its own, but it will pave the way for upcoming improvements that will simplify the blockchain’s architecture.
Another significant consequence with favorable long-term effects is the “triple halving” incidence.
In general, it is anticipated that the Merge will result in a significant decrease in the supply of ether. The annual issue of ether to miners will be cut, the current currency will be “burned,” and staking requirements that will remove ether from circulation will all contribute to this.
Combined, these processes will result in significant deflationary pressure, equivalent to halving the Bitcoin ecosystem three times. (Therefore, the term “triple-halving”). Many supporters of cryptocurrencies think that the triple halving would increase demand for ether and even cause it to surpass Bitcoin’s value within a year.
After learning about the benefits, let’s jump on to what crypto investors should know.
What Should Crypto Investors Know About the Ethereum Merge?
Ethereum is finally shifting to a less energy-intensive technology after years of dominance as the leading blockchain for smart contracts. So what does this entail for your cryptocurrency investments and crypto investors?
According to some experts, there may be an advantage for ethereum investors, but it’s impossible to say for sure. While some predict a rise in Ethereum’s price to above $10,000, others are still negative. However, everything is currently totally speculative as many people wait to see how investors and businesses who are developing their technology on Ethereum’s platform will react to the amendments.
The Merge shouldn’t have any impact on your long-term investing plan if anything. It will take some time for everything to come into place, and during this period, other variables like tighter regulation may have an impact on ethereum and other cryptocurrencies. Use this time to analyze your cryptocurrency risk tolerance and improve your knowledge of blockchain technology.
Due to cryptocurrencies’ newness and speculative nature, experts advise keeping less than 5% of your portfolio in this asset class. As with any investment, never risk more than you could afford to lose.
Certain vital factors should be kept in mind if you’re a Crypto investor excited about Ethereum Merge.
Key factors to keep in mind as Crypto investors
Although it is impossible to predict precisely how the Merge will work out in the long run, investors might wish to take the following factors into account:
- Nothing has to be done. The network’s website has stated that there is nothing major you need to do if you have ETH prior to the integration.
- Beware, scams may be on the rise. Ethereum advises against falling for fraudsters that tell you that you must upgrade or switch to a new cryptocurrency, such as “ETH2.” There is no such token.
- New coin creation has slowed. Because mining rewards, which are more significant than staking rewards, are no longer given out, the rate at which new ETH tokens reach the market has decreased by around 90%.
- Transaction speeds and gas prices are comparable. In general, Ethereum has faced issues with transaction fees that are too high and delays. The merger will instantly resolve neither of these problems.
- Sharding will become feasible. Because of sharding, the network can support more transactions, which divides the validation work into smaller portions. Allowing devices like phones to function as nodes might expand the Ethereum network’s user base and alleviate the congestion. The twist is that sharding is only an option after the Merge. On the Ethereum network, it is not currently there, but developers plan to add it in the coming year.
- There’s a possibility of increased power concentration. After the Merge, the network will advance thanks to stakeholder wealth rather than processing capacity. The biggest holders, including custodians, may end up having disproportionate influence in the Ethereum ecosystem; as a result, departing from the decentralized ethos that so many cryptocurrency supporters hold close.
Closing thoughts
Everyone is excited about the Merge, whether you are a newbie investor or a seasoned one. It’ll be interesting to learn how this Merge will majorly impact your investments. However, before making any move in trading Ethereum, always do your own research and stay alert to scammers and fraudsters who’ll be interested in finding a loophole during Ethereum’s shift.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
