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What is the Ethereum Merge? Will it affect the price of Ethereum?

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A single transaction on Bitcoin consumes enough energy that it can easily light up the 160 storied Burj Khalifa. Although transactions on Ethereum aren’t so massive in nature, they can easily consume enough energy to light up the Leaning tower of Pisa.

Some Cryptocurrencies utilise a tremendous amount of energy. The average energy utilised for transactions by various Cryptocurrencies is as good as electricity consumption bills of small countries. However the upcoming Ethereum Merge as well as the launch of Ethereum 2.0 is planning to bring in innovation into this metric.

The Ethereum Merge

Ethereum which is known for its self executing smart contracts technology is planning to bring in efficiency on its network paired with reduced energy costs as well as various other features and functionalities. Through Ethereum Merge the network will be further divided into smaller blocks resulting in a higher number of transactions at a greater speed. This process will be known as sharding. Ethereum is planning to incorporate a new avatar which will bring more developers on its network through the launch of Ethereum 2.0.

Prior to Ethereum Merge developers who would build any project on Ethereum network would have to pay a high amount of gas fees. However post Merge Ethereum is planning to lure developers into building on its network by providing the service at a lower gas fees. The sole reason behind reduction of gas fees is due to the transition to the proof of stake mechanism.

This transition will reduce the energy consumption of Ethereum by 99.5% thus resulting in lower gas fees. The scheduled Ethereum Merge is planned to be initiated from 13-15 September following which the entire Ethereum network will be updated.

Price of Ethereum

Ahead of the Merge the native currency behind Ethereum ie. Ether is trading at a high value. Over the past month the native token has been trading at a value around $1520/eth. Traders and analysts are hoping that the merger will directly affect the prices of the native token.

The reason behind investors expecting that the price of Ether will gain is because they feel that The Merge will be more beneficial to the network which has a high number of use cases as compared to Bitcoin. Bitcoin is restricted to financial transactions however Ethereum isn’t limited to financial transactions because along with being a cryptocurrency it’s also a blockchain network.

What are the advantages of The Merge

  • Swift transactions – Ethereum 2.0 is planning to handle nearly 100000 transactions on its network in a second. This will significantly reduce the overall gas fees on the network. The process of sharding will fit in a higher number of transactions making the network faster and easily accessible.
  • Low gas fees – The current setup processes around 30 transactions per second resulting in gas fees as high as $100. The simple metric behind this exorbitant price is that less number of transactions is directly proportional to high gas fees. However as the processing speed increases post Merge the gas fees can fall as low as $ 0.02.
  • Secure network – The Ethereum Merge will boost the overall security of the Ethereum network. The planned switch to a “Proof of stake” mechanism will increase the complexity of the network resulting in a secure network. The upgrade will result in a low energy consumption for users however it will significantly increase the energy consumption for malicious actors trying to crack the network.

The Ethereum Merge is a big step towards improving the entire Ethereum network however the upgrade will be applicable in various phases therefore it will take some time before the benefits of the upgrade will be beneficial for users.