As the Philippines continues on its way toward digital transformation, with the government now even exploring the use of digital currency in essential services such as emergency aid and healthcare, a huge event could soon change the cryptocurrency market as we now know it.
Specifically, we can expect “The Flippening or the Ethereum Merge,” a software switch that represents the joining of the existing execution layer of Ethereum (the Mainnet we use today) with its new proof-of-stake consensus layer, the Beacon Chain.
This upgrade will mark a radical change to how transactions on the Ethereum blockchain occur and ether tokens are created.
As a result, ETH could significantly expand its use cases and reduce its carbon footprint as the process can now eliminate the need for energy-intensive mining. This, in turn, should help secure the network further by using staked ETH — considered a truly exciting step in realizing the Ethereum vision of more scalability, security, and sustainability.
According to ethereum.org, the community-run technology powering the cryptocurrency ether (ETH) and thousands of other decentralized applications, the Ethereum Merge countdown will occur on September 15, 2022, or roughly three days from now.
“The Merge” explained
The Merge is a network upgrade that will change Ethereum’s current consensus mechanism from “proof of work” to “proof of stake.” Along with other improvements, this milestone will help Ethereum deliver on its commitment to becoming more scalable and secure, which can then turn Ethereum into the number one digital asset worldwide.
Ethereum is the cryptocurrency network that uses Ethers or ETH as its native crypto. The latter is the second-largest cryptocurrency in terms of market capitalization (market cap). Its current iteration follows the proof-of-work (PoW) model, so it operates with the help of volunteer miners.
These people confirm ETH transactions to earn more Ethers.
However, it has been a target of controversy for many years. For example, many critics lambast Ethereum as a major polluter on the planet. Also, they have noted its high transaction costs, a.k.a. gas fees.
Ethereum has since been forming a solution by testing a proof-of-stake (PoS) model. Instead of relying on miners, users may now deposit Ethers to a select group of validators. As a result, it can work like a savings account with potentially higher returns.
According to the Ethereum Foundation (https://ethereum.org/en/upgrades/merge/), a body that acts as a spokesperson for the network, we can expect the following changes to Ethereum:
1) More energy efficiency, smaller carbon footprint
Ethereum’s managers say “The Merge” will slash ETH’s energy consumption by 99.95%. It will also remove the need for substantial mining farms and their energy-guzzling machines.
More processing power facilitates crypto mining, so people worldwide invest in high-end computers and graphics cards. In turn, they consume vast amounts of electricity and increase their country’s carbon footprint.
That is why many news outlets and experts have criticized cryptocurrencies for years.
Fortunately, the new proof-of-stake model would not require users to invest in these devices as they now only need to deposit their coins to validators to earn passive income.
2) Reduced supply, increased value
Aaron Samsonoff, the co-founder of InvestDEFY, a digital asset trading platform, said that we can expect a 90 percent drop in new Ether issuance following The Merge.
This could also result in ETH getting a significantly increased value.
This prediction follows the supply and demand rule in economics. Simply put, prices of commodities will increase as supply drops and demand expands.
Moreover, the new staking model could also make it easier for new investors to use Ethereum.
3) More ETH transactions, increased use cases
Samsonoff says that as a result of The Merge, we may see more ETH transactions worldwide. He, however, said that how people will respond to the new model cannot be guaranteed. For one, Ethereum miners could opt to sell their graphics cards en masse, which could then cut the price of ETH.
“Let us say you want to mine Bitcoin (BTC) at home,” he explains. “You will need to spend thousands of dollars on a high-end computer to have enough computing power. On the other hand, Ethereum staking will only take you just a few taps!”
Nowadays, Ethereum also enables several use cases like non-fungible tokens (NFTs), which record the ownership of physical or digital items on a cryptocurrency network. It also allows decentralized apps as well as decentralized finance, and yield farming.
Countries such as Singapore and Switzerland have since increased online searches for Ethereum Merge. Overall, the world could soon change because of these innovations, and various nations anticipate them.