Ethereum has rolled out its biggest-ever upgrade! But is it a game changer for the Web3 world?
The Ethereum merge with Beacon Chain is finally complete! As a result, the blockchain network is closer to switching to Ethereum 2.0 once and for all.
This morning (September 15) at 2:42 a.m. EDT—following the merge of the Beacon Chain and Mainnet—the Ethereum blockchain completed its shift away from the Proof-of-Work (POW) consensus mechanism to Proof-of-Stake (POS).
The merge marks an essential and overdue milestone. The upgrade continuously faced delays. But finally, after much anticipation, the promised changes have been made.
Now, crypto enthusiasts and investors alike are asking: Was the merge successful? Is Ethereum now eco-friendly? Will staking yields rise? And has the price of ETH dropped?
This is where we come in, to answer those all-important questions.
Keep reading to stay ahead of industry changes and better prepare for what’s to come!
Success Behind the Merge
As you are most likely aware, Ethereum has been promising to transition into a more energy-efficient system by switching to Beacon Chain’s POS and ditching POW for years. However, bugs kept arising while attempting to merge, and the network struggled to boot out miners—delaying the upgrade time and time again.
Nevertheless, Ethereum has FINALLY successfully merged to POS. And, by all accounts, the changes were rolled out smoothly and efficiently (phew).
Vitalik Buterin, the CEO of Ethereum, shared the good news on Twitter:
Although all is well so far, the next few hours, days and even months will show us the health of the Ethereum network post merge. Developers will be monitoring metrics behind the scenes like never before, to determine how things are going and make the necessary changes if need be.
Moreover, following the lead-up to the merge finalizing, several exchanges, like Coinbase, Kraken, Binance and FTX, paused trading and withdrawals. Trading is resuming as usual now, with Ethereum’s token Ether (ETH) slightly trading downwards following a 3% run-up before the event.
But what does this upgrade really mean for the cryptocurrency market?
Recent Changes Made
Since day dot, the Ethereum merge has promised to make changes regarding the environment, Ethereum as a “network stake,” and lowering gas fees. However, it’s important to note that the merge won’t change everything as indicated immediately.
Following this, three major questions circling the crypto space include:
“Is Ethereum eco-friendly?”
Unfortunately, for the last five years, the impact of POW mining has harmed our carbon footprint—preventing consumers from wanting to partake in activities on the blockchain. POS is here to make the right changes and bring more members on board.
Thanks to the removal of intensive POW mining from Ethereum, the merge will reduce the blockchain network’s energy use by more than 99%.
Although interestingly, POS transforms the playing field for not only cryptocurrencies but also NFTs. The reasons are that most NFT collections live on the Ethereum blockchain. Moreover, the digital assets are the clearest case of real, end-user products with numerous use cases on the Ethereum blockchain network.
Many consumers are concerned about the environment regarding the blockchain—especially when buying NFTs and cryptocurrencies. Thankfully, the merge is here to erase those concerns by providing a much more eco-friendly network.
Will cryptocurrencies and NFTs suddenly become all the more appealing now it’s eco-friendly? We’ll see.
“Will Ethereum’s staking yields rise?”
One of the prominent conversations many ETH users have been having is regarding what yield to expect on Ethereum since moving to POS.
Rumour has it that Ethereum staking will pay out yields as high as 12% now the merge is here. However, current staking data gives a much lower yield number.
Regardless, the yield number depends on numerous factors. If network activity booms, Ethereum can reach higher yield estimates. So, unless the network sees a boom in market activity, yields will stay low for the time being.
Let’s dig into how Ethereum determines its staking yield for further clarification. For POW to be efficient, the validators—who are now in charge of processing all transactions instead of miners—must stake ETH to earn yield in return.
For example, the yield paid to validators comes from:
- Block Rewards: Block rewards incentivize validators to earn Ether each time a successful transaction goes through. Although, all validators must share block rewards to determine the amount of ETH staked.
- Transaction Tips: During network congestion, when many users go to the platform to purchase the same project, users can tip validators to ensure their transactions are prioritized before others, contributing to Ethereum’s staking yield.
- Maximum Extractable Value (MEV): MEV rewards are a small component of Ethereum yield. Validators posting new blocks can reorder transactions, and buyers can attempt to pay validators for placing an order that only they can profit from.
According to Dune Analytics, more than 13.50 million ETH is staked, which is approximately 11.3% of the total supply. This puts validator block rewards at around 4%.
Interestingly, Swiss-regulated crypto platform SEBA Bank implemented Ethereum staking ahead of the upgrade.
“Has the price of ETH dropped?”
Last but not least, another critical discussion concerns the effect the merge will have on the price of Ethereum. Money makes the world go around, after all. Unfortunately, answers are still up in the air. ETH may go up or down. But, for now, it’s trading at around $1,500 per token, according to CoinGecko.
Lower charges regarding unwanted gas fees will eventually enable as the merge rolls out more changes. But, before investing in ETH, it’s essential to note that the price change won’t happen immediately.
At the moment, alternate layer 1 blockchains, like Solana and Near, and layer 2 networks, such as Polygon and Optimism, are still as valuable as before the event.
The Bottom Line – Final Thoughts
One of the most significant events in the Web3 world is finally here. The excitement is no surprise, considering energy consumption has reduced by a whopping 99% thanks to transitioning to POW.
Now the blockchain network is much more energy efficient. We can only hope that more consumers join and explore the beauty of the blockchain and all that it brings and put much criticism to rest.
Following much suspense, the expectation for the network is high. However, for the time being, crypto enthusiasts and investors need to keep levelheaded and patient and not expect significant positive changes to happen overnight. For instance, as mentioned above, unless Ethereum sees a boom in market activity, yields will stay low for the time being.
In short, not until the network becomes more popular post-merge will we see many of the positive changes promised to us.
So, go check out the upgrade and see what you can buy and trade using ETH!
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