3 Ethereum Merger Benefits You Need to Know – The Motley Fool | Jewelry Dukan

Despite a 58% drop in 2022, ether (ETH 1.84%) has posted an excellent return of over 600% over the last five years (at the time of this writing), slightly overwhelming the broader crowd S&P500 Index in this period. But as many cryptocurrency devotees know all too well, a major obstacle in Ethereum’s journey to greater adoption has centered on a lack of scalability. That is, until now.

Three Motley Fool contributors discuss the benefits of “The Fusion‘ – which according to Google is not complete – will bring about. It has the potential to catapult the price of Ether or ETH to new heights. Let’s take a closer look.

1. Ethereum allows more users to join the network

Michael Byrn: The merger is a positive outcome for many Ethereum network participants as now more of them can earn rewards for participating in and securing the network. With the transition from Proof of Work to Proof of Stake (PoS), transactions on the network are no longer validated by miners. Post The Merge, transactions will be settled via staking, where Ethereum holders can commit or “stake” a portion of their Ethereum holdings to validate transactions and secure the network to earn a portion of transaction fees.

While mining requires a significant amount of upfront investment and effort, staking is more accessible to everyday Ethereum users. There are still some barriers to entry. Holders must commit at least 32 Ethereum (worth over $50,000 in Ethereum at current prices) to run their own node to validate transactions, which is prohibitive for many investors. There are further steps to be taken.

The good news, however, is that a number of widely used services, including coin base and Lido Finance, now allow customers holding less than 32 Ethereum to enjoy these benefits by facilitating staking in a relatively simple and automated process. At the moment, staking Ethereum on Coinbase pays 3.25% APY and staking on Lido Finance pays 3.8% APY.

Users should be aware that once they commit their Ethereum to staking on Coinbase, they will not be able to trade the staked portion for a significant amount of time, but this should not be a problem for long-term holders. Those interest rates are superior to many dividend stocks and well above the market average for the S&P 500, and the ability to generate passive income in a fairly seamless manner is another compelling reason to own Ethereum.

2. The merger paves the way for shards

RJ Fulton: It may come as a surprise that Ethereum is still a blockchain in development even after The Merge goes live. Vitalik Buterin, a co-founder of Ethereum, said that he considers Ethereum only 55% complete after The Merge.

Before Ethereum can reach its full potential, two more things need to happen – an increase in transaction speeds and a reduction in fees. Merging won’t solve these directly, but it is a necessary step to resolve these issues.

The meaning of The Merge boils down to one thing – it will lay the foundation for Ethereum to eventually expand its capacity, making it faster and less expensive. To do this, a process known as sharding is introduced.

Sharding will split Ethereum’s blockchain into smaller, more manageable blockchains. Instead of having to validate all transactions on the main blockchain, validators become more efficient as they can only focus their attention on those happening on their shard. You can think of it as adding extra lanes and cashiers at the grocery store.

Additionally, sharding will lower the barriers that come with being a validator. When sharding is introduced, data storage requirements will be eased as validators would be responsible for storing a fraction of the blockchain’s data. That means you could run the Ethereum network from your laptop or phone in the future.

This is in high demand among blockchain developers as security and decentralization increase as the network becomes more widespread.

Ethereum’s website states that sharding is set to be unveiled sometime in 2023, depending on how much progress is made post-merger. Once launched, sharding will help Ethereum move one step closer to its ultimate goal of “becoming powerful enough to help all of humanity.”

3. Ethereum is now more ecologically friendly

Neil Patel: One of the most widespread advantages of The Merge focuses on Ethereum’s energy consumption. As Bitcoin (CRYPT: BTC)up to this point, Ethereum has operated a proof of work (PoW) consensus mechanism. This means that massive amounts of computing power are required to solve complex mathematical problems in order to validate new transactions on the blockchain. It is described as slow, expensive and energy intensive. In fact, estimates suggest that Bitcoin’s network requires as much energy to operate as a small country.

After The Merge, Ethereum’s Proof-of-Stake system will result in a whopping 99.95% reduction in energy consumption, according to Ethereum’s official website. Powerful and expensive computers are no longer required to operate the Ethereum network, eliminating the need for specialized hardware and thus avoiding e-waste. This is an incredibly remarkable development, especially in this day and age when the fight against climate change is more of a focus than ever.

Investors who value companies that care Environment, Social and Governance (ESG) practices may now see Ethereum as a worthwhile financial instrument. Bitcoin and Ethereum before The Merge have become political punching bags due to their energy consumption. Knowing nothing else about cryptocurrencies, other than that some use a lot of electricity, it’s easy to end the discussion there and continue to cast these digital assets in a negative light. For Ethereum, this will no longer be the case. And this new potential demand from ESG-focused investors could push ETH’s price higher simply because the network isn’t as energy-intensive as it was before.

Looking ahead, the biggest hit against Bitcoin, energy consumption, isn’t a valid argument that can be used against Ethereum either. And this is a bullish sign for the latter cryptocurrency.

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