Ethereum Merge Done: Now WHAT? Will ETH Recover?!

It was one of krypto’s biggest moments To date but the ethereum merge has come And gone and everyone is asking a really Important question now what what does This mean for the future of the network And the price of eth and are there any Risks ahead for ethereum in the Post-merge era that’s exactly what I’ll Be answering in my video today so if you Hold eth or are considering doing so Then this is a video you cannot afford To miss Foreign Last week on Thursday at 6 40 AM UTC Ethereum finally made the transition to Proof of stake it was a nail-biting Moment that had everyone including yours Truly on the edge of our seats it was Even more tense given that not long Before a few sync issues had been Discovered on the final test net But as the block came and the code was Pushed there was a palpable sense of Relief in the air the price of eth Briefly shot up in a relief rally However this was short-lived as the day Progressed it fell by almost five Percent as it turned out that this was Indeed a Selden news type of event But beyond that there were a number of Immediate questions raised by the Transition and one of the primary Concerns that presented itself was one That many had argued could be a risk

Including us here on this channel This is the risk of validator Centralization on the ethereum network Now while minor centralization was Always a concern the extent of the Centralization on the new proof-of-state Network is alarming 42 percent of the Network in other words was effectively Within the control of these two entities Now the centralization of a supposedly Decentralized network is of course a big No-No but it’s even more concerning at This particular time That’s because of the potential for Regulatory capture of ethereum it’s Perhaps no coincidence that on the same Day that the merge went ahead Gary Genser was up to his usual shenanigans On Capitol Hill During testimony in front of U.S Politicians he said that Cryptocurrencies that allowed users to Quote stake their coins could be seen as Securities this assertion is based on That Infamous fourth Criterion of the Howie test and argues that quote the Investing public is anticipating profits Based on the efforts of others So this threw up a lot of questions About how Regulators are going to view Proof of stake ethereum This is unfortunate given that a few Weeks before the merge it appeared Likely that Bitcoin and ethereum would

Be regulated in the future by the Commodity Futures Trading commission or Cftc a regulatory body notably more Enlightened about cryptocurrency than The SEC As we know a security designation means That this would place them back under The sec’s jurisdiction Now some seem to think that this could Be nothing but fun which Perhaps it is But as a thought experiment if eth was Designated as security could these Validators be in breach of any Securities laws let’s not forget that Coinbase is based in the US and most of The VCS that control ldo Supply are too This simply shouldn’t be an issue on a Decentralized and permissionless Network Then of course you have all those Concerns that came before the merge About the potential for censorship of Transactions this was all around the Sanctioning of tornado cash now I did a Video about this in much more detail Which I’ll leave in the description for You if you want all the ins and outs the Main concern here though was censorship At the protocol level wood validators Exclude all transactions that involving Tornado cash As I said in the ethereum video I Released before the merge no one is Going to risk breaking sanctions Irrespective of where they are on the

Decentralization ideological Spectrum That said coinbase is fighting these Sanctions with a lawsuit against the Treasury Department respect Now it’s unlikely though that this Lawsuit will bring any sort of clarity In the near term and in the meantime Centralization questions will remain Moreover as these validators continue to Stake and their rewards build up their Power in the staking contract will grow More disproportionate nothing can be Withdrawn yet and the functionality to Do that will only come with the next Upgrade which brings me neatly on to the Next topic we need to examine Some of the fud that has surrounded the Merge has been around the idea that we Would see a flood of staked eth hitting The market as validators looked to sell But as I mentioned this can only be done Once the Shanghai upgrade is complete in About six months time now apart from Allowing Beacon chain withdrawals the Shanghai upgrade will also introduce Eip-3540. I won’t go into too many Technical details here but the core of This upgrade is that it will separate The code from the data also known as evm Object format there will also be changes That will potentially lower gas fees This will be done by equalizing the Block sizes and increasing the call data Functionality of the block

Moving beyond Shanghai though the Ethereum devs have a whole host of Upgrades on their roadmap These all used to be a part of eth 2.0 But they have now taken on some much More colorful names The next stage in the roadmap is the Surge this is the stage that will Introduce sharding now this is seen by Many as the upgrade that will bring most Of the scaling benefits to the ethereum Network That’s because it will see the majority Of the network split across a number of Different blockchains known as Shard Chains now without getting too technical This will allow computation to be done In parallel as each of the individual Shard chains will handle their own Computations These will then be settled on the main Chain at a later stage They would also enable those roll up Layer 2 solutions to be even cheaper and Make nodes easier to operate as they Won’t need to store the entire Blockchain When it comes to scalability transaction Throughput should increase exponentially With the number of shards If we were to include layer 2 scaling Benefits then there are some estimates That we could see ethereum handling up To 100

000 transactions per second Now in terms of timing The Surge could Be expected next year although there are No definite dates yet Then after the surge is complete we’ll Have the Verge this will bring with it The introduction of vertical trees now These are a powerful upgrade to Merkle Trees which will optimize data storage And node size further helping with Scaling capability Next up after that will be the purge Which will allow for the removal of Spare historical data and the purging of Irrelevant data essentially it will Streamline storage and further help to Reduce Network congestion And then the final step will be the Splurge this is in fact a range of Smaller quote miscellaneous upgrades That will ensure that the network is Able to run smoothly while incorporating All those previous upgrades So there’s no doubt a lot to look Forward to from a development Perspective a process of constant Evolution to move the ethereum network To that long envisioned goal of being a Global decentralized virtual computer But in the immediate short term recent Events have a number of other Implications for the network and these Relate to monetary economics I’ve talked about the impact that the

Reduced block emission and fee Burns Will have on the eth inflation schedule Otherwise known as the triple halving on A number of occasions Prior to the merge there were only Estimates as to the impact it would all Have but after a few days we have a Better picture hopping over to Ultrasound.money we can see exactly what Has happened to the supply of eth it Initially fell right after the merge but Has been climbing ever since However at the time of shooting this Video the supply growth was running at 0.16 per year that’s if we were to Assume the current emission rate of 603 000 per year and a burn rate of 413 000 Per year Thankfully this site has a handy feature That allows us to switch over to what The conditions would have been if we Were still on the proof of work chain in This case the supply growth would have Been 3.79 per year so based on those Stats the transition reduced the Emission rate by 92 percent if you run The numbers on that it’s almost a Quadruple halving and is also Incredibly Close to no inflation and even deflation That is the scenario that many etholders Are looking at which will make eth Ultrasound money I should also note that the current Bitcoin inflation rate is 1.8 although

This will approach zero as it goes Through future halvings now How likely We are to approach eth deflation depends On the total emission which is driven by Amount staked as well as the amount That’s burned the latter is of course Driven by the number of transactions This is something that is likely to Increase not only because of all the Scaling benefits achieved through the Numerous upgrades that I talked about Earlier but also because of utility Demand one of the primary use cases from This will be the need for stablecoin Payments which are growing at a rapid Pace A recent survey for example found that Among businesses surveyed with annual Income exceeding one billion dollars 85 Percent said they are adopting crypto Payments to find and gain new customers You also have to factor in the scaling And efficiency gains that are likely to Come because of the continued Development of layer 2 Solutions and as Mentioned before sharding will only make The case for Roll-Ups that much more Compelling now all of this utility use Demand combined with an increase in Burns decreased supply means an asset That should be that much more valuable Holding all other things equal Okay so that’s the monetary Dynamics Behind each demand and Supply drivers in

The long term it should be price Positive however once the Shanghai Upgrade has been pushed could this Result in a flood of unstaked eth Hitting the market well Not quite Firstly there is the question around the Initial deposits of the validators if You’ll recall these were 32 eth well Once Shanghai has been implemented and People can unstake this Heath there will Still be a process to handle the amount That can be unstaked in a given period This is in order to ensure that there Isn’t that much of a change in the Validator set in a given time obviously That would be a risk to the network As such there will be quote a withdrawal Q which will limit the rate of validator Exits This will be limited by protocol whereby Only six validators can exit per Epoch Now just for reference an Epoch is every 6.4 minutes so if we were to assume 32 Each exited per validator that would Amount to 192 East per 6.4 minutes or Roughly 43 200 each per day Bear in mind that there’s currently 14 And a half million youth being staked so That would amount to just 0.3 percent Not a price breaking amount by any means Of course the rate is adjusted based on The amount of eth staked to continue Ensuring security

So that’s the minimum staking amount However validators will still be able to Withdraw any rewards that may have Accrued since they started staking Rewards that will have been accruing for Over a year that is a great deal of eth That could hit the market Well that all depends on whether those Validators will really want to sell According to research from the nanson Analytics firm last week 71 of those who Have staked did so at a price higher Than Seventeen hundred dollars in other Words they are currently at a loss and It’s likely to be worse now given the Fact that eth’s price has fallen further Since then So the question inevitably becomes Whether these holders will be so Keen to Dump their eth that they’ll do so even At a loss this will only be the case if They were in desperate need for funds And willing to take the L But this doesn’t really make sense to me That’s because if there were ever a Question about the need for liquidity They wouldn’t have locked it up for an Uncertain period of time in the staking Contract According to more data from nanson quote Eth Millionaires and billionaires have Consistently been stacking ethereum Since the beginning of this year Seemingly unfazed by volatile markets

Smart money seems to be scaling in again After a low in early to mid-june so the Dreaded scenario of unstaked eth Crashing the price seems to be less Likely however all of this assumes eth Hasn’t become an even more compelling Investment post-merge allow me to Explain The energy reduction that has been Achieved by the move to proof of stake Cannot be understated The move to proof of stake has cut eth Energy use by 99.98 and carbon dioxide emissions by 99.992 percent According to a new report from the Crypto ratings Council the entire Ethereum network now uses less CO2 than A few hundred U.S households now I found This tweet particularly entertaining as It does a good job of visualizing Exactly what the move to proof of stake Means When viewed in totality the merge will Reduce Global energy consumption by 0.2 Percent pretty crazy All of this makes eth a much more Compelling investment for all those Institutions that were put off by crypto Minings association with energy use now Yes I know that a lot of this is fun and If you watch my recent video on the White House’s Bitcoin mining report You’ll know why but you cannot deny that

The ESG investing narrative is a Powerful force so could we see large ESG Centric firms like BlackRock upgrade eth In their rating criteria could we see Large Pension funds using the ESG Narrative as the green signal to buy pun Very much intended Not only that but should these investors Decide to stake their eth they’ll be Earning passive income on the asset Similar to the way they view dividends For stocks when valuing discounted cash Flows could Warren Buffett even crack Out his calculator and run the numbers On eth’s long-term potential and present Value Well who knows but the point is that the Investment case for eth among more Traditional investors has strengthened It’s not only eth as an asset that will Benefit from this Green Halo though you Also have the demand for use of Ethereum’s network for example if you’ll Recall one of the main cases given Against the adoption of nfts was the Crazy gas fees that were paid to Mint And move them naturally this also Required a whole lot of energy so now That that energy use is minuscule Environmentally conscious artists Musicians Brands and other potential nft Adopters can finally jump in as nft Adoption increases Network use surges Which further increases demand for eth

And drives the burn and as an added plus Gamers won’t get a salty about in-game Nfts as they won’t have to compete with Eth miners for pricey gpus win-win Okay time for some of my thoughts on the Merge and in case it wasn’t obvious These are purely my opinions and not Investment or financial advice this Merch isn’t just for sure you know Now there’s no doubt that the ethereum Devs pulled off an incredible feat as They termed it it was analogous to Changing a rocket ship’s engine in Mid-flight There were many many things that could Have gone wrong but didn’t I put that Down to the meticulous planning that the Devs went through despite all the doubts That had been cast about their ability To succeed Now of course this was a sell the news Event and some have been disappointed About the lack of fireworks on the day But this was always to be expected Scaling benefits will not come until the Search then we have the Verge Purge and Splurge still to look forward to But at this very moment the predicted Monetary changes are having an impact on Each Supply emissions have dropped Considerably and inflation is now Minuscule now while the impact of this Won’t be felt in the short term it’s Something that is likely to play out in

The longer run It’s that much more of a compelling Investment based on this point alone Then of course there’s the green angle That comes with this upgrade Institutional investors can finally Invest in eth and start staking now that Questions around its environmental Impact have been eliminated the same can Also be said for companies that want to Consider nft or stablecoin payment Integrations Now all of this being said Centralization is a concern a situation Where the top five staking entities Control two-thirds of the stake teeth Isn’t a great place to be And this is even more so the case when You consider the fact that many of these Validators are based in the United States whether they could be forced to Comply with orders from the man is an Important question Then again we also have to remember that With proof of work mining pools also Control a great deal of the hash power To the move to proof of stake the top Three ethereum mining pools controlled 50 percent of the Network’s hash power That aside though the question now Shifts to how we can further Decentralize the ethereum network the Argument can be made that it’s a lot Easier to operate and run a validator

Than it is to crack out a GPU and start Mining there’s no need for racks and Racks of machines taking up your garage Empty rooms or you know large Warehouse Facility somewhere in Iceland all you Need is 32 eth and a servo Moreover with a proof-of-stake system Non-staking nodes have more power in Keeping staking nodes in check as Compared to keeping miners in check This means that we can play our part in That decentralization by running a node And if you happen to be lucky enough to Have 32 eth then you should consider Setting up a validator and doing so I’ll Leave some guides in the description Yes it’s a lot easier to stake on an Exchange or through a liquid staking Protocol but that defeats the purpose of Decentralization Yet if there’s anything that the merge Has taught me it’s that when the Ethereum community comes together they Can do great things And that’s it for my ethereum video Today folks but I would love to get some Of your feedback now so where do you Think eth is heading bullish or bearish Or do you have another layer 1 pick that You prefer let me know in the comments Down below And while you’re down there you can also Find links to all the other places that You can follow me apart from YouTube

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