Ethereum Merge, Is It Better for Crypto Investors?
Ethereum is the most popular altcoin and the second largest cryptocurrency by volume. As an alternative to bitcoin, this cryptocurrency has built a deep reputation in a short span of time. Now there are reports that Ethereum is planning a software update, which could prove to be a better fit for your crypto investments. You may have heard about the update coming in the form of Ethereum 2.0 or Eth2, which the Ethereum Foundation calls the ‘Ethereum Merge’.
YouTuber and crypto trainer Hashoshi said in a recent episode of his podcast ‘Crypto over Coffee’ that I am confident that we will see a positive reaction in the market later this year. The Ethereum merge is believed to increase its processing and provide more security and stability. Also Hashoshi believes that this will also reduce the energy consumption of Ethereum by 98% or more. Armando Aguilar, independent crypto analyst and former digital asset strategist at Fundstrat Global Advisors, says that with this upgrade, the altcoin could see a rise in price.
Should the investment strategy change?
There’s no reason for you to do anything while technology develops, says Doug Bonparth, financial advisor and president of Bone Fide Wealth. If you are investing in Ethereum or any type of blockchain technology, let’s assume that you are with that technology, which is currently in its early stages. You will need a long time to see how things develop. ‘I don’t think holders of Ethereum should be doing anything at this point,’ he advises.
Ethereum price is down more than 35% from its all-time high in November 2021 and trading volume is down. However, some bulls are predicting that there could be a huge jump in the price of Ethereum.
How is Ethereum updating?
Ethereum is moving up the beacon chain. Both Bitcoin and Ethereum used a system called ‘Proof of Work’ to approve every block chain transaction. These transactions are added through a process called block to block chain, or digital ledger. Proof-of-work systems require all computer networks to create new blocks, which takes a lot of computing power.
Now the ‘proof-of-stake’ model is cutting down on this amount of energy use. It requires less computer. Just as banks need their customers to pool their money so that they can move around and lend money, the proof-of-stake model in crypto allows the ecosystem to circulate cryptocurrencies the same way. Since crypto has already been mined once, the proof-of-stake model takes less time and energy to verify new blockchain transactions than the proof-of-work model.
Why is Ethereum updating?
Switching to a proof-of-stake model makes sense for several reasons. It uses less energy and addresses concerns that cryptocurrencies are bad for the environment. Second, proof-of-stake is the newer process, seen as more advanced and more widely accepted. With the updation of this technology with a low carbon footprint, low power consumption, the charges against Ethereum for spreading global warming will also decrease rapidly.
When will the Ethereum update happen?
The original Ethereum mainnet (proof-of-work model) currently runs parallel to the Ethereum Beacon Chain. This will soon merge with the new Proof-of-Stake model developed in late 2020 as planned. The network will become more energy-efficient after Mainnet Ethereum merges with Beacon Chain. The first phase of this merger is targeted for the third quarter of 2022. Ethereum core developer Tim Beiko wrote in a tweet that the change is likely to happen “after a few months” in June.
Ethereum will then implement a larger rollout with smaller moves during 2023, with smaller short chains over time. Sharding is the process of breaking large data into smaller pieces so that the network can process them at a faster rate.
What does the future hold for Ethereum?
The update is likely to reduce the supply of new Eth. Christine Kim, research analyst at Galaxy Digital, said the reduction in supply is a positive for most Ethereum investors. High-profile crypto professionals are predicting that the Eth bull run will reach $10,000 in 2022. Investor Mark Cuban is also bullish on the upcoming merger of Ethereum. There are all signs for the Ethereum block chain to maintain its position as the leading smart contract block chain and possibly become the new leader in cryptocurrencies.