What Ethereum Integration Mean For Regular Users – And What It Doesn’t

the summary

  • Ethereum’s long-awaited proof-of-stake move – dubbed a “merger” – is finally happening.
  • A lot will change. But much will remain unchanged.

The Ethereum join together over here. The long-awaited upgrade to the second largest cryptocurrency by market capitalization is expected to take place tonight, based on Current estimates.

So, what does this mean for you, as a regular user or investor? Whether you originally keep your life savings or just 0.01 ETH, the network moves from one Business Certificate blockchain for one Effort proof You will do things differently. But what exactly?

For a while, there were rumors that this upgrade would do the trick Ethereum faster and cheaper. But that’s not true — at least not yet, anyway, according to the Ethereum Foundation and the experts I spoke to. Decrypt.

What is merging?

Merger Is Much Talk About Ethereum Moving To Effort proof. Currently, the cryptocurrency network uses the same consensus network as the Bitcoin: Proof of work. this is Energy-intensive method Maintaining network security consumes huge amounts of electricity (More than entire countries) to process new transactions on the network.

However, proof of stake is different. Instead of using bimetals, validators are needed. The validators can be anyone with at least 32 ETH available to “stake” or pledge to the network. Users can also participate in smaller amounts of ETH through staking pools or cryptocurrency exchanges. Today is the day Ethereum makes the transition to this consensus mechanism.

This way of doing things is proof of a solution to energy consumption at work: The Ethereum Foundation Claims It will make the grid more energy efficient by more than 99%.

But today’s promotion don’t do Solve other issues related to Ethereum throughput and capacity (i.e. the number of transactions processed per second). One hopes soComing later.

Merger Won’t Make Ethereum Faster

Ethereum’s transition to a new consensus mechanism will mean that the blockchain will be more energy efficient, but that does not mean that Ethereum transactions will be faster.

why? Because moving to Proof of Stake only means that 10% more blocks are being produced than in Proof of Work, according to the Ethereum Foundation.

Fast Ethereum transactions would be nice, of course: just like buying things with a credit card online, it gives you peace of mind when the transaction is done quickly. But with this cryptocurrency network, things will not speed up significantly yet.

“Although there have been some small changes, the transaction speed will mostly remain the same as in Layer 1,” the foundation He said. “This is a fairly minor change that users are unlikely to notice.”

Consolidation Won’t Make Ethereum Transactions Cheaper

Many believe that moving to Proof of Stake will reduce Ethereum’s high gas fees, and the cost of conducting transactions. It’s not true – though it is a wish It will decrease with future promotions.

Lots of applications and cryptocurrencies run on the Ethereum blockchain. This means that often, to do things with such applications (think decentralized exchanges or DeFi lending protocols), you will need some Ethereum – sometimes very From Ethereum – to pay for the transaction.

from the network High Reputation Fees Some people have been discouraging the use of blockchain altogether, looking for “Ethereum killers” like Solana, Avalanche or Tezos to create NFTs.

But contrary to what you might think, this week’s upgrade won’t make it cheaper to use Ethereum. “The merger is a change of compliance mechanism, not an expansion of network capacity, and will not lead to lower gas charges,” the foundation said.

Ethereum will be doing proof-of-stake, which will make things more energy efficient — over 99% more energy efficient, the foundation says — but not cheaper.

“It’s lower power consumption overall,” said PJ Murphy, CEO of Artgreen, an Ethereum-based creative DAO focused on facilitating investment in CryptoArt. Decrypt.

Is it a good idea for Ethereum to participate in an exchange?

As a private investor, you may have received emails from many exchanges telling you to participate in your ETH on the exchange. You might already do that. But is this a good idea?

Depends on who you ask. said Mika Zolto, developer of Ethereum core Decrypt of course not. “You shouldn’t bet the swap,” he said. “It hurts the network rather than helps, and the ROI at the moment is probably not worth it.”

He recommends placing your ETH on your own, by Run your own node– Which anyone can do with a computer. “It can be done by anyone with a good enough computer, electricity and internet,” he said.

Zoltu continued that this was because giving Ethereum to an exchange at stake involved security issues. “You give your bet to someone else, who can decide to attack with this bet,” he said.

Others are less concerned and see benefits to companies like Coinbase or Binance that make it easier for regular users to share ETH and passively earn rewards. – It’s been planned for a long time. It should be very smooth on the major trusted platforms, says Artgreen’s Murphy.

Should you be worried about investing in the stock market? It depends on how much control you want, said Ethereum core developer Danno Ferrin. “My argument,” he said, “is that I am too obsessed with control to release the proceeds of my efforts at the risk of interruption.”

“Maybe they are better at it, but when they make mistakes, it will be on a large scale.”

Merger Won’t Make Ethereum deflationary

With this upgrade, the monetary policy of Ethereum will change. But there is a common misconception that ETH, the original cryptocurrency of the blockchain, is going to become deflationary – it won’t. The transition will be added to Proof of Stake contraction pressure to cryptocurrency. why? Because fewer cryptocurrencies will be rewarded to those who keep the network secure than before.

With proof of work, the total number of miners is rewarded ~13,000 Ethereum per day. But when Ethereum moves to Proof of Stake, that number will drop by 90%, as the Ethereum Foundation did. He said. So the total number of speculators will be rewarded with approximately 1,600 Ethereum per day.

At the same time, a certain amount of ETH paid to the network will be burned in the form of transaction fees – a change that came into effect last year through the EIP-1559 upgrade. This, along with a slower rate of issuance, will add deflationary pressure on the cryptocurrency – but it won’t automatically make it deflationary. Instead, it will reduce Ethereum’s inflation rate. Over time, it is possible that more ETH will be burned than is being issued on a yearly basis, but a merger alone will not make that happen.

What does merger mean for private investors?

So after all that, what does this mean for someone holding some Ethereum on the exchange? Or for the lucky investors who have already used cryptocurrency to buy something like NFT?

Well, according to some experts, the merger shouldn’t matter at all. “For regular users, integration means almost nothing,” Ferrin said.

Zolto agreed. “The merger should be for nothing if all goes well,” he said.

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