Ethereum The Merge: what are its benefits on the ETH blockchain?

A little over a month ago, the ethereum blockchain was going through a massive update that was dubbed a merger or The Merge. This took place in several stages and transformed Ethereum from a blockchain based on mining to a platform focused on staking.

Many effects due to this merger have been observed on the blockchain. Here are some of the benefits of the Ethereum merger.

Reduction of energy consumption

The first effect immediately observed following the Ethereum merger is the significant drop in energy consumption on the blockchain. One of the stated objectives of The Merge was in effect to change the consensus mechanism of the blockchain.

It has therefore moved from proof of work or PoW (Proof-of-Work) to proof of stake or PoS (Proof-of-Stake). As a result, the Ethereum network has since become more ecological, because it consumes less energy.

Ethereum The Merge what are its benefits on the ETH

Indeed, before the merger, Ethereum’s energy consumption was 80 TWh and now has increased to 0.01 TWh per year. Today, we can read on the platform’s official website that nearly 99.95% of energy consumption has decreased.

From then on, the Ethereum network will no longer need powerful and expensive computers to operate. The material need and the electronic waste are thus reduced.

Ethereum price explosion

The merger will allow the ETH token to become deflationary and have negative inflation. From then on, the price of Ethereum will increase, because its supply will reduce. Indeed, according to the predictions of the price of Ethereum, its value will increase.

According CoinGekothe price of ETH rose to $1,560 after the merger, an increase of 8%.

Drop in issuance of new ETH tokens

Another result of the Ethereum merger is that the amount of new Ether issuance has dropped by almost 90%. At issue, validator rewards were reduced as a result of the merge.

It can thus be seen that the supply of ETH has fallen from 400,000 to 6,500 since the merger. According to ethereum foundationthe number of mined ethers will increase to 1,600 after the merger, thus leading to an increase in the value of the crypto.

The proliferation of Ethereum validators

The Ethereum merger has seen the birth of a multitude of proof-of-stake validators. We have thus seen the participation rate of validators, in charge of verifying blocks, reach 99.5%. This rate indicates that the majority of Ethereum validators are now dealing with new nodes.

Concretely, node validators before the merger numbered 420,000. After the merger was completed, the number increased to 435,000 and together they staked almost 13.2 million Ether.

The staking mechanism and its implications

For institutional investors, the staking could make Ethereum an attractive alternative to bonds and produce an annual return of between 10% and 15%. In return, staking providers can be expected to corner the market and control the majority of node validators.

This was observed by the fact that 4 providers now have a monopoly on Ethereum’s validator nodes. These suppliers are Lido, Coinbase, Binance and Kraken. Therefore, the Ethereum merger should cause a centralization problem that will have to be solved during the next update which should take place in 2023.

He is the founder of Gnosis Chain, Martin Köppelman who first alerted to the danger of blockchain centralization. In a tweet, he raised the fact that 420 of the first 1,000 proof-of-stake blocks were under the yoke of two groups of providers. It should be remembered that to become a validator on the Ethereum blockchain, you must now have at least 32 ETH and pool them in a pool.

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Ethereum The Merge: what are its benefits on the ETH blockchain?

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