Is Ethereum still a buy after the merger? – The colorful fool | Jewelry Dukan

You probably heard that The Merge completed successfully last week. Now that one of the biggest upgrades in cryptocurrency history is complete, what’s next? ether (ETH 2.62%)and how should investors deal with the second most valuable cryptocurrency in the world?

First, let’s make one thing clear: the merge is just one step in Ethereum’s evolution. Blockchain is still a work in progress. In fact, Ethereum is believed to be barely halfway done, at least according to one of its co-founders, Vitalik Buterin.

At the Ethereum Community Conference in Paris this July, Buterin was asked his thoughts on the future of blockchain. He said that after The Merge was completed and launched, Ethereum would still only be operating at 55% of its potential.

Additionally, he discussed future improvements and implementations that will help Ethereum eventually process up to 100,000 transactions per second (tps), orders of magnitude faster than the 12 to 20 tps in its current state. But to reach this level of speed and capacity, Ethereum needs many more upgrades.

Details of the merger

With any event as significant as The Merge, rumors and speculation usually circulate. Some of the most common misconceptions surrounding The Merge have had to do with speeds and fees. Since it has become one of the most popular blockchains in recent years, congestion on the Ethereum network has increased significantly. This increased traffic caused speeds to almost grind to a halt and transaction fees to increase significantly.

Ethereum’s goal is to one day remove these bottlenecks, but that won’t happen with The Merge. The merger changed the way Ethereum processes and verifies transactions, moving Ethereum from a proof-of-work consensus mechanism to a proof-of-stake mechanism. The only way to optimize speed and reduce fees is to increase the capacity of the network, which is not done directly by moving to Proof of Stake.

But the importance of The Merge should not be underestimated. Now that Ethereum is on Proof of Stake, the foundation has been laid for the blockchain to more easily evolve.

Without the transition to Proof of Stake, Ethereum would have difficulty scaling, a term used to describe a blockchain’s ability to handle more transactions at faster speeds. As mentioned earlier, moving to Proof of Stake Ethereum will not directly make Ethereum faster or increase throughput, but it will allow the network to increase its scalability.

The scaling solution

One of the main ways Ethereum scales is through a method called sharding. This process essentially splits the main Ethereum blockchain into multiple chains, or shards. Sharding on a proof-of-work blockchain is not impossible, but it is much more difficult to implement compared to a proof-of-stake network.

Once sharding has started, validators approving transactions only need to process transactions within their shard rather than the entire blockchain. Think of it like Ethereum going from a two-lane road to a six-lane highway. With sharding, Ethereum’s network will finally increase its capacity, and as a result, user fees should decrease and speeds should improve.

The plan is for Sharding to go live sometime in 2023. Ethereum’s website states that The Merge has been prioritized first and once that is complete, attention will shift to implementing sharding.

Long term potential

Most importantly, investors understand that Ethereum is not a finished project. If the blockchain was able to peak near $4,900 over the past year while still on proof of work, imagine the heights it could reach if developers continue to upgrade.

These upgrades will not happen overnight. Additionally, Ethereum is notoriously sluggish when it comes to deadlines. The merge was several years in development and the implementation date was pushed back several times.

Assuming that Sharding will follow a similar path to The Merge in terms of timeframe, investors should use this opportunity to add more Ethereum to their portfolios. Ethereum is building for the future by ensuring it’s able to support more users with faster speeds and cheaper fees, a great combination for a price boost. Priced below $1,400, what’s not to like about Ethereum’s potential?

RJ Fulton has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum. The Motley Fool has a disclosure policy.

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