According to a new DappRadar report released Friday Ethereum (ETH) The upcoming Merge update could significantly impact the functioning of popular decentralized financial chains.
The study focuses on the delays that can occur during the transition of ETH to the Proof of Stake consensus mechanism, commonly known as Merge.
“DeFi Protocols May Be Interrupted Due To Ethereum Update, Stablecoins May Decrease In Value”
According to the report, the long-awaited (and often delayed) technology update could slow transaction times or create service disruptions in DeFi lending protocols, creating headaches for these platforms.
According to analysts, this could ultimately devalue stablecoins and shrink DeFi lending pools.
Pedro Herrera, data analyst at DappRadar, says that Merge’s negative impact on Ethereum market supply could affect DeFi liquidity pools even if the transition goes smoothly:
“If Merge fails to launch successfully, we will experience delays in DeFi protocols that will affect stablecoins. But from a supply dynamics perspective, this may also affect how stablecoins are used for liquidity pools in the DeFi space and beyond.”
The report also stated that DeFi platforms are likely to experience network outages as some Ethereum-based protocols lag behind the ETH chain in their transition to the Proof of Stake consensus mechanism.
Herrera continued his statements as follows:
“There is a risk that Merge will cause technical difficulties such as timestamp synchronization between nodes or other technical issues that prevent Proof of Stake from synchronizing after Merge.
This may force Ethereum to pause block production or temporarily halt production while its developers work on the issue.”
*Not investment advice.
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