© Reuters. FILE PHOTO: Souvenir tokens representing the Bitcoin, Ethereum, Dogecoin and Ripple cryptocurrency network plunge into the water in this illustration taken May 17, 2022. REUTERS/Dado Ruvic/Illustration / File image
By Medha Singh and Lisa Pauline Mattackal
(Reuters) – The union has come, seen and conquered. Not you guessing from crypto prices.
The blockchain’s major upgrade finally arrived on September 15, moving it to a less energy-intensive “proof-of-stake” (PoS) system with almost no hiccups.
While anticipation of the event saw ether rally around 85% from its bleak June, it has since dropped 19%, hitting bitcoin and other risk assets. because investors are angry about inflation and central bank policy.
However, many market players are optimistic about the long-term prospects of Ethereum and its native cryptocurrency.
Markus Thielen, chief investment officer at IDEG Limited, said: “We have previously spoken with sovereign wealth funds and central banks to help build their digital asset allocation. … but direct investment was voted down due to energy concerns.”
“With Ethereum moving to PoS, this clearly solves this last pillar of concern.”
Some crypto investors are now turning their attention to the next event that could increase the price.
The next significant upgrade for Ethereum is “Shanghai”, which is expected by market participants over a period of about six months, aimed at reducing its high transaction costs.
It will allow validators, who have deposited ether tokens on the blockchain in exchange for profits, to withdraw their set coins, to hold or sell.
There’s a lot at stake: more than $20 billion in ether deposits are currently locked, according to data provider Glassnode.
According to CoinMarketCap data, the cryptocurrency ether – seen as a bet on Ethereum’s long-term success as it cannot be redeemed until Shanghai happens – is trading roughly on par with ether at levels. 0.989 ether, according to CoinMarketCap data, shows confidence in future upgrades.
The coin fell to as low as 0.92 in June.
PURGE AND SPLURGE
In addition to Shanghai, a series of other upgrades are also planned for Ethereum, which co-founder Vitalik Buterin has nicknamed “the spike”, “the brink”, “the purge”, and “the splash”. .
The main focus of future upgrades is likely to be on the blockchain’s ability to handle more transactions.
“Because the Consolidation has been delayed for several years, investors, traders and End users have a lot of anxiety about Ethereum scaling meaningfully.
“The future of Ethereum needs and will scale to hundreds of millions of transactions per day,” said Paul Brody, global blockchain lead at EY.
Merge’s main goal is to reduce Ethereum’s energy usage as cryptocurrencies burn because of their huge carbon footprint. The blockchain’s energy consumption is estimated to have been cut by around 99.95%, the developers claim, which could appeal to strong institutional investors, previously constrained by concerns environmental, social and governance (ESG).
Consolidation and future upgrades also reduce the investment appeal of the so-called “Ethereum destroyers,” said Adam Struck, CEO of venture capital firm Struck Crypto.
However, institutional investors have yet to jump in, as the fearsome macro environment chills the risk-loving waters.
However, in the long run, the move to PoS is expected to reduce the rate at which ether tokens are issued – potentially by up to 90% – which will drive up the price.
Additionally, the annual yield of 4.1% to stake ether tokens to validate transactions could prove attractive to investors.
However, while the proof-of-stake approach allows for these attractive returns, many crypto purists point out that it takes Ethereum out of the purely decentralized model because people The biggest confirmation can make a bigger impact on the blockchain.
For now, however, the Ethereum world can be advised to enjoy the moment of Consolidation.
“There could be volatility in the coming days,” said analysts at Kaiko Research. “But for now, the community can get a well-deserved victory.”