Ethereum (ETH), the largest altcoin, recently held the “merge” event. Thus, proof-of-work (PoW) has moved from consensus algorithm to proof-of-stake (PoS). It has demonstrated its efforts to increase energy efficiency. However, its price did not give the expected response to the merge. It declined due to other factors. So, should you buy ETH in the current situation? RJ Fulton, analyst of the US-based consulting company The Motley Fool, shared his thoughts.
Analyst drew attention to merge
cryptocoin.com As we have also reported, the merge took place last week. What’s next for Ethereum, which has completed one of the biggest updates in cryptocurrency history? How should investors approach the world’s second most valuable cryptocurrency? According to the analyst, first, we need to clear something up. Merge is just one step in the evolution of Ethereum. Blockchain is still a work in progress. In fact, Ethereum is believed to be only half complete, according to one of its co-founders, Vitalik Buterin.
At the Ethereum Community Conference in Paris this July, Buterin was asked about his thoughts on the future of Blockchain. He said that once Merge is completed and launched, Ethereum will still only work at 55 percent of its potential. Additionally, he discussed future improvements and applications that will help Ethereum eventually handle 100,000 transactions per second (tps). Currently, the amount of transactions per second on the ETH network is 15-20. But to reach this level of speed and capacity, Ethereum needs a lot more upgrades.
Merge’s details
In any event as important as Merge, rumors and speculation often circulate. Some of the most common misconceptions revolving around Merge had to do with speed and fees. Since becoming one of the most popular blockchains in the last few years, congestion on the Ethereum network has increased significantly. This increased traffic caused the speed to almost come to a standstill and the transaction fees to rise significantly. Ethereum’s goal is to one day get out of this bottleneck. But that won’t happen with Merge.
Merge changed Ethereum’s consensus algorithm, changing the mechanism for processing and validating transactions. The only way to increase speed and reduce fees is to increase the capacity of the network. This doesn’t happen directly with merge either. However, the importance of the merge should not be underestimated, according to the analyst. Now that Ethereum is PoS, Blockchain can be developed more easily. Switching to PoS does not directly make Ethereum faster or increase throughput. But it allows the network to eventually increase its scalability.
What is the scaling solution for Ethereum?
One of the primary ways to scale Ethereum is through a method called sharding. This process essentially splits Ethereum’s main Blockchain into multiple chains or parts. Sharding in a Proof-of-work blockchain is not impossible, but it was much more difficult to implement compared to a Proof-of-Stake network. Once sharding is launched, validators confirming transactions will now only need to process transactions within its shards, rather than the entire Blockchain.
With sharding, Ethereum’s network will eventually increase its capacity, after which user fees should drop and speeds will increase. The plan is for sharding to be implemented in 2023. Ethereum’s website stated that priority was given to Merge. He then states that once this is complete, attention will shift to the implementation of sharding.
What is Ethereum (ETH)’s long-term potential?
The most important thing, according to the analyst, is for investors to understand that Ethereum is not a finished project. The analyst pointed out that ETH broke a record $4,800 last year when it was still a PoW network. “Imagine the highs it can reach as developers continue to upgrade,” he said. These upgrades won’t happen overnight. For example, merge has been in development for several years and its implementation date has been delayed several times.
Assuming that Sharding will follow a similar path to Merge in terms of timelines, investors should take advantage of this opportunity to add more Ethereum to their portfolio. Ethereum is building for the future by enabling it to support more users with faster and cheaper fees. He says it’s a great combination for price appreciation. Currently, ETH has fallen to the $1,200 levels.
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