Could the Ethereum Merge Be a Curse to the Crypto Industry? Here is a Closer Look
- The Ethereum CEO said there might be more contentious hard forks on Ethereum, with stablecoin providers having more relevance.
On Wednesday, Ethereum CEO, Vitalik Buterin, discussed Ethereum’s Merge at the Seoul BUIDL Asia conference. Buterin said centralized stablecoins such as USDT and USDC could determine the network that the industry would “respect in hard forks.” A hard fork is a radical change in a blockchain protocol resulting in two versions but with one version preferred over the other.
Buterin explained that there would be two versions of the networks after the Merge. Then, there would be exchanges, oracle providers, and stablecoin providers. Cryptographically, there would be equal amounts of USDT on each chain, and the stablecoins would need to choose the one they would respect.
However, Buterin emphasized that this scenario won’t likely happen at Ethereum’s forthcoming Merge. He noted that the scenario would likely apply to future hard forks. He also said there might be more contentious hard forks on the Ethereum network in the next five to ten years.
By then, the centralized stablecoin providers would have greater relevance and determine which chain to respect. Buterin proposed that there should be various kinds of stablecoins as a possible solution to centralized actors. “People could use USDC, but they could also use DAI. For instance, DAI has gone beyond being a purely crypto economic but also a wrapper for several real-world assets.”
Bigger Picture of the Ethereum Merge
A Citigroup research report released on Thursday stated that there would be several consequences once Ethereum completes its switch to become a proof-of-stake (PoS) network (the Merge). The bank said such consequences include:
· Lesser energy consumption.
· A possibility to become scalable in the future via sharding.
· The switch to becoming a deflationary asset.
The report states that the Merge would reduce block times (from 13 seconds to 12 seconds). Hence, it would cause a 10 percent increase in transaction speeds. However, it becomes the foundation for the ‘Surge,’ the network’s next upgrade after the Merge. Once the Surge upgrade is complete, the Ethereum network can process 100,000 transactions per second.
The report further revealed that Ethereum’s overall assurance would decrease by 4.2 percent once it switches from PoW. Hence, it would make Ethereum (ETH) deflationary and enhance its use case as a store of value. The bank notes that the switch will make ETH a “yield-bearing asset” with cash flows. Thus, resulting in a revenue stream for the network.
Consequently, there can be a deployment of a range of valuation methods for the blockchain. Ethereum would less likely be the network with the highest throughput since it is both yield-bearing and deflationary. Instead, it would be the network with a rising amount of secure and transacted total value locked (TVL).
The note added energy expenditure on the PoS Ethereum would likely decrease by 99.95 percent post-Merge. Meanwhile, crypto exchange, Poloniex, has announced that it will list and support Ethereum’s upgrade and the hard forks that follow on its platform. The exchange notes that it would receive the forked assets at a 1:1 ratio following the completion of the Merge. Poloniex further notes that it already has a swap page with two potential forked tokens (ETHS and ETHW).