What should investors do to prepare for the merger of ETH2.0?
July 2022, Thiago Freitas
Data Sources:Developer Meeting Notesimage description
ETH price action, previous 30 days - source: Footprint Analytics
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What is Ethereum Merge?
A series of upgrades are taking place on the Ethereum blockchain, typified by its transition from Proof of Work (PoW) to Proof of Stake (PoS) consensus mechanism. During the upgrade process, there are the following milestone events:
consensus layer"consensus layer"。
Ethereum’s PoW validation will be replaced by a brand new PoS consensus mechanism (currently estimated to happen in September), while the existing Mainnet chain will act as the “execution layer”.
The consensus layer will be responsible for the security of the network. The execution layer is where smart contracts run and where transactions are generated.
secondary title"merge"。
Why Consolidation Matters
The Beacon chain has started to operate in December 2020, so a considerable part of the supply of ETH has been pledged on it, and the pledge interest is obtained for maintaining the normal operation of the network. Currently, more than 12 million ETH are staked on the Beacon Chain smart contract:
This figure is almostTotal ETH supply10% of. Additionally, these ETHs are locked for a long period of time, as the PoS ETH chain has not yet set a redeemable date.
How Mergers Affect ETH Release
according to
according toData from Etherscan, the circulating supply of ETH increased by 13,347 ETH on July 21. If we don’t look at the income from mining and only look at the income from staking, the daily net value will be negative. This means that more ETH will be burned as fees than used for yield rewards, reducing the total supply of ETH.
How to take advantage of the changes resulting from the merge?
By analyzing the existing data, investors can adopt some of the following investment strategies:
Buy ETH
With the announcement of the merger date, the supply of ETH will continue to grow for a short time. After this, it will become"deflation". If investors believe that ETH will have a significant presence in the cryptocurrency market, its demand will increase and the price of ETH will rise accordingly. We have seen obvious fluctuations in the price of ETH, but because of the increase in ETH pledges and deflation, the price of ETH still has a wider room to rise.
Liquidity Staking ETH
Since the redemption time of ETH sent to the Beacon chain pledge contract is unknown, and the minimum amount that needs to be sent is relatively high (at least 32 ETH), some projects have created a liquidity pool, and users can get ETH without locking ETH Staking rewards. Some of these pools also create an ERC-721 token that serves as a tradable proof of staked ETH.
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Source: Lido Finance
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ETH and stETH price action, previous 30 days - source: Footprint Analytics
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From a long-term perspective, if Ethereum maintains its dominance in the blockchain and the blockchain industry continues to grow, ETH price will rise with the merger. Because the token will switch from inflation to deflation. With supply shrinking and demand remaining the same (and likely increasing), it is logical for ETH to rise in price.
The Footprint Community is a global, mutually supportive data community where members leverage data visualizations to co-create communicable insights. In the Footprint community, you can get help, establish links, and exchange learning and research on blockchains such as Web 3, Metaverse, GameFi, and DeFi. Many active, diverse, and highly engaged members inspire and support each other through the community, and a worldwide user base is built to contribute data, share insights, and drive the community forward.
This article comes fromFootprint Analyticscommunity contribution
The above content is only a personal opinion, for reference and communication only, and does not constitute investment advice. If there are obvious understanding or data errors, feedback is welcome.
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The Footprint Community is a global, mutually supportive data community where members leverage data visualizations to co-create communicable insights. In the Footprint community, you can get help, establish links, and exchange learning and research on blockchains such as Web 3, Metaverse, GameFi, and DeFi. Many active, diverse, and highly engaged members inspire and support each other through the community, and a worldwide user base is built to contribute data, share insights, and drive the community forward.
