How can investors prepare for a merger?

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This update will change the way the network is protected, its power consumption and Ethereum tokenomics. Rates will now play an important role. So how should an investor prepare for future events to make the most of it?

Go back to the casting process

The Ethereum blockchain is currently undergoing a series of updates to move it from a Proof of Work (PoW) consensus mechanism to one. Proof of Stake (PoS) consensus mechanism.. To do this, follow these steps:

  • Creation e Introducing a chain of headlights took place on December 1, 2020. Beacon Chain introduces PoS on Ethereum. This is why it is called the “consensus layer”.
  • Change the current consensus mechanism of the chain from PoW to PoS (the current deadline is September 19th). The existing network then acts as a “executive level “what will the current functioning PoW look like replaced by a chain of signals.

The consensus layer will take care of this. network security. What executive layer this place where smart contracts are executed and where transactions are created. Since the update will merge these two chains into one, the name of this event has been changed from ETH 2.0 to Merger, that is merger In French.

What are the consequences of the merger?

Since the headlight chain is already running from December 2020, a significant portion of ETH’s supply is already betting on the latter, earning rewards for network performance. Currently there are more than 12 million ETH on the Beacon Chain smart contract.

This number represents almost 10% discount on the current ETH supply. Also, this ETH is stuck in the long run because it’s not there. no date relative to the possible date for unstaker its ethers as part of the ETH PoS chain.

After switching to PoS, there are no more mining rewards. Therefore, ETH emissions will decrease significantly. In addition, 10% of the offer has already been placed. According to Eterscan, On 21 July, a total of 13,347 ETH was added to the current supply.. If we remove the blocking (mining) reward and leave only the staking reward, the daily net result will be negative. This is what it means more ETH will be burned as compensation as compensation, which the total supply of ETH will decrease.

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None of the following statements constitute financial advice and investors should always do so. exercise extreme caution when trading cryptocurrencies. By analyzing the data presented, it is possible to notice some of them Investment strategies that an investor I could guess:

Buy Ethereum

With the release of the near-final date of The Merge, there is a short period during which ETH’s offering will continue to grow. After that there will be “deflationary”. If an investor believes that ETH will occupy an important place in the long-term cryptocurrency markets and demand will increase, The price of ETH will automatically increaset.

We have seen similar price movements before, but they exist. there is still room for moreas the incentive to increase the amount of ETH staking (and not in circulation) will increase over time.

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Cryptocurrencies are a risky investment.

👉 To find out more, read our Ethereum buying guide.

Buy liquid ETH

Since ETH stuck on Beacon Chain is blocked for an unknown period of time and the minimum amount to be sent is relatively high (32 ETH minimum), Pools were created to help users stake their Ether.. Some of these pools then created an ERC-721 token as a negotiable receipt for this staking ETH.

Examples – token stETH Lido Protocol e PET from the rocket tank. When a user logs into the ETH staking platform, their token is minted. 1: 1 ratio with respect to ETH.

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Lido Finance example (Source: Lido Finance)

However, as this is a receipt for a later refund, it is consistent with Discount from the ETH price. This discount is not fixed, its value is determined by the market, as we can see in the graph below:

Source: footprint analysis

Buying a connected version will allow the investor to make a profit with an excess yield of 2 to 3% and associated accrued interest if it is willing to wait for the staking function to begin after the introduction of the PoS on the Ethereum blockchain. There is no deadline for introducing this feature (unlock), but The approximate period is from 6 to 12 months after the merger..

Therefore, in the long run, the price of ETH could rise after the merger. if Ethereum maintains its leading position and dominate the cryptocurrency market and that the blockchain industry will continue to grow as the token moves from an inflationary problem to one deflationary issue. If supply decreases and demand remains the same (and most likely increases), Raising the price of Ethereum is a logical next step.

To increase earnings Purchase a liquid version of ETH can provide additional benefits an investor can wait longeras the liquid version often has a discount on the ETH spot price.

Here are some keys to making the most of the upcoming merge taking into account the associated risks to such an investment. However, many observers agree that Ethereum is well positioned to remain one of the leaders in the long-term cryptocurrency market.

To learn more about the impact of a merger on minors, read our article here.

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