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Has It Affected the Network’s Inflation?  –

Has It Affected the Network’s Inflation?  –

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Ethereum completed a major network upgrade, marking the crypto world’s most ambitious software update to date and paving the way for changes that could increase the use of the commercial blockchain. The update, known as Merge, was completed early Thursday, according to a tweet from Ethereum founder Vitalik Buterin.

The software updates led to a reduction in the use of mains electricity

After the transition, the network’s native token Ether, stored in special wallets known as “stake wallets,” was used to place orders instead of power-hungry machines. As a result, Ethereum is predicted to consume 99% less energy.

Such a revolution has never been attempted in the history of crypto, especially Ethereum, which has 3,500 active decentralized applications from exchanges to games that collectively process billions of dollars worth of crypto. The merger, which has been in the works for years, will not change how Ethereum works for end users. However, it is a crucial first step towards further improvements that will make the network faster and cheaper, and should further strengthen its reputation and adoption.

The merger changed the characteristics of Ether, making it more similar to income-producing securities. According to Tracker Staking Rewards, Staked Ether yields around 5.2% after compounding. The coin should become more attractive to investors when combined with the projected net decline in Ether token supply soon after the upgrade.

The Ether token has fallen more than 50% this year after growing fivefold in 2021. Over the past month, its performance has come close to that of Bitcoin, the world’s largest cryptocurrency.

The Merge software update is named after the existing Ethereum blockchain that will be merged into a parallel network that has been running for almost two years to test the proof-of-stake concept. The update has been in the works for over seven years.

The risk of defects and other hiccups remains

Based on what has happened since previous Ethereum software updates, merging may take days or even weeks of hiccups. Worried about bugs and hacks, cryptos such as Coinbase Global Inc. halted Ethereum-related withdrawals and deposits during a software update. Aave, a crypto lender, had suspended Ether borrowing prior to the merger.

The likely creation of copies of Ethereum that still use power-hungry computers known as miners adds to the concern. These forks, like EthereumPOW, create copies of ether coins that are distributed to all mainstream ether holders. Tokens can be worth anything. However, the existence of multiple versions of Ether, each operating on a different chain, can cause confusion and lead to attacks and scams. Copies of other tokens running on fork chains can too.

While all current Ethereum apps and wallets have been replicated on forked chains, most apps are likely to be broken as key players such as USDC stablecoin issuer Circle and oracle provider Chainlink have announced that they will not support forked versions. It remains to be seen whether fork chains are viable in the long term.

For years, large groups of Ethereum developers from all over the world have been working on the merger. They introduced the Beacon Chain, a parallel network that tests the organization of events through staked coins, or a system known as Proof of Stake, in late 2020. Beacon was connected to Ethereum’s mainnet using miners to connect, making Beacon Ethereum’s way of testing. organizing online events.

Less Ethereum by next year due to post-merger rule changes

Post-merger data shows 297,000 ETH being burned annually at the current rate, with issuance falling from 3.78% per year to 0.22% to 0.25% per year. Miners would have produced 4,931,000 Ether per year before The Merge became PoS; the annual issuance has dropped to 603,000 new ethers per year.

ETH has a circulation of 120,583,249 ethers, which is worth $158.57 billion at current exchange rates.

If Ethereum never merged, the total supply would be around 125,514,249 by September 19, 2023 without the burn rate of EIP-1559.

However, according to the burn rate and post-merger rules, the total supply of ETH by September 19, 2023 should be 120,889,249, or 4,625,000 ethers less than under the previous PoW consensus rules. Proponents of ETH believe that, like Bitcoin’s halving features, the rule, as previously mentioned, changes will make Ether more difficult than traditional sound money, or as supporters now call it “ultrasound money.”

The price of Ethereum may have taken a hit

“People may have expected a successful Ethereum Merge event to lead to a price increase, but the price dropped 10% over the past week,” says Austin Kimm, Director of Strategy and Investments at the MetaFi Ecosystem. “This doesn’t come as a surprise. The success of the merger was a foregone conclusion. Markets always price in what they anticipate and overreact when it doesn’t happen. Consider the recent drop in all stocks and cryptocurrencies when US inflation was only 0.2% higher than expected. This as a result, a successful merger was assumed to have already been successful and did not lead to price increases.”

This was followed by comments from the SEC after the merger, who believe that Ethereum is now a security because people can earn from other people’s actions. This surprised the market a bit, and with no other good news in sight, the price has taken a bit of a hit.

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