"The Merge" is Upon Us: ETH
Ethereum is set to undergo a change of consensus mechanism from Proof-of-Work (PoW) to Proof-of-Stake (Pos) in what has been called “The Merge.” The Block reports that in the next 48 hours, Ethereum's core developers will merge Ropsten’s PoW chain with its PoS Beacon chain. The main objective of the testnet merge is to practice Ethereum's mainnet merge later this year. The benefits of "the merge" are projected to be:
- This transition to PoS will result in a 99.9% reduction in Ethereum's energy consumption.
- The elimination of miners, who earn ~ 13.5K ETH/day will reduce sell pressure on the token coupled with a ~ 90% reduction in issuance of ETH rewards.
- In August 2021, The London Ethereum Hard Fok (EIP-1559) changed Ethereum's monetary policy to burn a portion of transaction fees. Since then, 85% of all fees have been burned while 15% have gone to miners as a reward. With the elimination of miners and 90% reduction in new ETH issuance, the network is projected to have a steady-state deflation of 1-2%.
- Yields on staked Ethereum, which are rewards for securing the network, are also expected to rise from ~ 5% to between 7% and 13%.