Investor: why are you particularly fond of Ethereum 2.0?

The Ethereum network’s transition to the upgraded Ethereum 2.0 just cleared one of its final hurdles, with Ethereum developers successfully testing merging the proof-of-work model into a proof-of-stake model. This merger, which should be effective in June, is major and will bring several considerable advantages to investors, the network and the sector.

What changes exactly will the merger bring that will be such a big deal for crypto and investors? Ethereum will undergo a triple halving event, making it a deflationary assetit will offer staking rewards for investors who will potentially provide a high yield and the energy efficiency of the entire network is set to become astronomically better as it gradually eliminates mining.

Proof-of-work to proof-of-stake migration

Ethereum will move from a proof-of-work model that relies on miners to a proof-of-stake model that relies on long-term ether holders who stake large amounts of ether to vote for the correct block validations with each creation. Those who vote for incorrect blocks will have their Ether supply cut off, creating a robust and secure system.

When the network migrates, it will significantly reduce the rewards for new blocks (by around 90%, according to IntotheBlocks estimates), creating an ecosystem where more ethereum is burned in gas fees than the we create them daily. This shortening of supply causes ether to become a deflationary asset as opposed to an inflationary assetwhat it was before.

“People have been so excited about the bitcoin halving; merging is like dividing by two and a half. If the merger was just a halving of Ethereum, it would be the biggest crypto story, and everyone would be talking about the next major bull market.”

High yield opportunities

The proof of investment model will reward ether holders (long-term ether holders who authorize their tokens to be used for network operations) with freshly minted ethers if their tokens are used by the network. While staking can be done actively, it is also possible to contribute to a pool managed by another person and earn ether passively.

While it is not yet known what the staking yield will be for ether, estimates range between 5% and 15%with an average consensus of returns above the current CPI of 7.9%. At a time when most other investments offer negative returns, investing in Ethereum could offer positive real returns.

“Through the merger with the Proof of Stake chain, fees previously collected by miners will be transferred to those who stake. This should translate to staking rewards between 7% and 12%,” IntoTheBlock wrote in a newsletter.

Energy efficiency and increased speed

By removing miners and adopting a proof-of-stake model, the Ethereum network will increase its energy efficiency by more than 99%. For investors and institutions that have long shied away due to energy and emissions issues with cryptocurrencies, the world’s second largest cryptocurrency is on its way. to offer an ecological solution.

In addition to becoming more energy-efficient, the network will become faster overall when it implements sharding, whereby the entire Ethereum network is divided into chunks, called shards, in order to distribute the load over a larger number. of parts. This will increase transaction speeds and help solve the congestion issues that the Ethereum network frequently encounters as a primary home for DeFi, NFTs and the like.

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