On September 15, Ethereum is expected to complete its merger from a proof-of-work to a proof-of-stake consensus mechanism, which could have a major impact on the cryptocurrency.
Ran Neuner, Founder and Host of Crypto Banter, said the upcoming merger, also known as “The Merge,” will be the biggest event in crypto history since the mining of the first Bitcoin.
“This ETH merger is the most significant event that has happened in [crypto] since the first Satoshi block was mined,” Neuner said. “This could be the biggest catalyst for crypto, but it could also be the biggest disaster for crypto.”
The merger is expected to shift ETH’s consensus mechanism from an energy-intensive proof-of-work protocol to an ESG-friendly proof-of-stake dynamic. If the merger occurs successfully on September 15, as expected, stakers will be rewarded with a return of 5-15%.
“The whole reason that Munger and Buffett and all these guys are just pissed off with everyone in crypto is [cryptos] don’t produce a return,” said Steven Sidley, a professor at the University of Johannesburg and head of the university’s Blockchain and CryptoVerse research group. “In fact, Ethereum after The Merge is yielding, so it ticks that box.”
Neuner and Sidley spoke with Michelle Makori, editor and main anchor of Kitco News, who moderated the roundtable.
Cryptocurrencies are validated using a proof-of-work or proof-of-stake consensus algorithm. A proof-of-work mechanism forces miners to solve a complex mathematical problem, which confirms transactions and rewards successful miners with more coins. Proof of Stake, on the other hand, allows coin holders to “stake” their coins, in exchange for validation privileges and potential performance rewards.
“Proof of work effectively means you need expensive mining machines to validate transactions,” Neuner said. “These mining machines have to solve a mathematical problem, which is very complex and consumes a lot of electricity… Proof of stake is a much more energy-efficient way of validating transactions that doesn’t require all that heavy machinery.”
The Ethereum merger on September 15 is expected to move ETH from proof-of-work to proof-of-stake. However, Sidley cautioned that the transition to proof-of-stake is only the first part of the overall merger process.
“Gas fees are unlikely to go down and transaction rates won’t go down,” said Sidley, who is also a best-selling author and director of Bridge Capital Future Advisory. “It happens in 2023, with the next stages of The Merge, and there will be a price rebound…but it will be a much bigger rebound when they go to what is called danksharding, which is the next stage from The Merge, which raises the TPS [transactions per second] and lowers the price of gasoline. That’s when I expect really exponential growth.
ETH will turn deflationary
After The Merge, the amount of Ethereum burned will exceed the number of ETH created, said Neuner, who is also CEO and co-founder of Onchain Capital.
“We have to look at it on the day of the merge because after that what happens is the amount of Ethereum released is less than the amount of Ethereum burned, which means eventually the number will trend towards zero,” he explained. “That’s why it’s so powerful, because you reduce Ethereum’s supply while making the network much faster and much easier to adopt.”
Neuner said this would make Ethereum deflationary, which in turn could make ETH more valuable.
“So now you have the two main assets, Bitcoin, which is mildly inflationary, and Ethereum, which is ESG friendly, generates between 5 and 15% returns, and is actually deflationary,” he said. declared. “And when you put all of that together as an investor… [ETH] might actually be a better investment than Bitcoin.
To find out if Neuner and Sidley’s price predictions for Ethereum and Bitcoin after The Merge, watch the video above.
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