Robert Steinadler, 4 months ago

Ethereum is getting closer to the Merge and the market is going wild

The Merge is probably the biggest thing in crypto right now. Fans and investors have been waiting for a long time to see this event happening. It will merge the current Ethereum blockchain with the so-called beacon chain and start the transition from proof of work to proof of stake. This is merely the beginning of a long journey since there are more stages ahead until Ethereum 2.0 is finished.

Why is the Merge such a bullish event and what is the status of the big transition?

Final testnet is running in August

It was Wednesday when the development team of Ethereum’s protocol announced that the Goerli testnet will merge with Prater approximately between August 6th and August 12th. Before the transition is done, the Prater testnet will receive an upgrade on August 4th preparing everything for the big event.

The big news is that we now have fixed dates for the final testing to start. While there is still a chance that the Merge will be postponed again, it is more likely to start on September 19th as anticipated. This has driven up expectations and is also the reason why Ether is outperforming Bitcoin for a few days.

With the big event at the doorsteps, everybody seems to be excited. But why is that? What makes the Merge so special in terms of Ethereum’s price movement?

What will happen post Merge?

Nothing much to be honest. The roadmap for Ethereum 2.0 is very long and it might take a year or two until everything is finished. This means that some things like scalability won’t happen overnight.

In terms of scalability sharding and rollups are the future solutions for Ethereum. While rollups are already available, sharding will take some time. The reason why everybody is so excited is the fact that the Merge will change the emission rate of Ether drastically. Ethereum has theoretically an infinite supply. It is to be expected that with proof of stake and EIP-1559 both being active the Ethereum supply will become scarce.

Miners issue about 13.000 ETH per day. The validators on the other hand will issue far less Ether. This will reduce the emission rate down to 1.600 ETH per day. EIP-1559 is already introduced and is burning a fixed amount of Ether per transaction.

What we are looking at is the possibility of a huge supply shock. Many analysts have mocked Ethereum for a long time since it is far away from being digital gold. There will be no fixed supply but constant demand for dApps and DeFi will have a huge impact because the available amount of Ether will shrink drastically. It seems that scarcity is not only defined by a strictly limited supply.

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