On the night of the 15th to the 16th of September the big event where the entire market was waiting for happened. What am I talking about? The merge update in the Ethereum network, which transformed the famous cryptotoken from a proof of work concept to a proof of stake concept.
The expectations for this event where huge, and the ETH fan base expected it’s price to go sky high, but what has happened until now? And what can we expect to happen?
Until now the price of ETH has been tumbling and is down 17,71% since the event happened.
ETH had big plans for the launch, and creator of the coin Vitalik Buterin spreaded videos of him explaining the merge. However, his explanation did not work out as he expected.
Vitalik explained the merge in the following way: “Proof of Work is based on the laws of physics, so you have to work with the world as it is… Whereas because Proof of Stake is virtualized in this way, it’s basically letting us create a simulated universe that has its own laws of physics.”
Investors in ETH worry about the feasibility of creating your own laws of physics. Further concerns developed after an on-chain analyses of the current ownership of the crypto token. Currently there are 13,7 million Ether staked, and 59,3% of these (8,13 million) are owned by just 4 providers. Adding to this that 45,18% of the validations performed on the blockchain since the roll-out of the merge have been performed by only 2 providers. These two taken together highly concern ETH supporters, since they can create a more centralized platform.
Another problem with staking your ETH is that it will hold your token for at least half a year. Seeing current prices, and knowing crypto’s high volatility, putting aside your tokens for half a year can be seen as quite a big risk.
Looking at the current market, it is obvious that ETH is being shorted by most investors. However, is this merge for the better? Will proof of stake indeed be the more sustainable alternative to proof of work, or will its flaws catch up with them?
Really insightful post! I think it is an incredible transition. It seemed initially that it was an impossible task. It is cool to see how the employees worked together and achieved such an open-source network.
I think the amount of energy saved will have positive effects on our society and will give society morally a boost.
Regarding the dip of the crypto, first of all, I think it will take time to adapt a proof-of-stake network. Eventually people will stake their Ethereum and their will be a more balanced contribution leading to a less volatile coin with a higher value.
Another fact contributing to the dip ( a more economical one) is the fact that crypto traders are preparing for worldwide economical measures to diminish the current inflation. This is also noticeable with other crypto, like bitcoin, which is at it lowest point since 2020.