Dynamics of the volume of funds in popular stacking protocols. Data: Dune Analytics (@LidoAnalytical).
Bankless co-founder Ryan Sean Adams has suggested that over time ETH will become something like perpetual Internet bonds, whose holders will be both creditors and owners of the network. Thus, ether, as an underlying asset, will become less and less involved in dapps.
Given the wide range of interesting options from SaaS providers, we can expect further growth in their popularity and hence in the value of assets under management (TVL).
There is a trend towards decentralization in the segment. For example, Lido is introducing distributed validator technology. A newer service, Rocketpool, positioned as a decentralized steking platform, is gradually gaining momentum. When will Merge be activated?
Testing of The Merge is in full swing: on June 8, Ethereum developers migrated the Ropsten network to PoS. Goerli and Sepoila testnets are expected to transition within weeks.
In May 2022, Preston Van Loon, one of the leading developers, said that the transition of mainnet to PoS will take place in August. Vitalik Buterin also named the last month of summer as the most likely date, but allowed the event to be moved to September-October if "potential risks" arise.
According to conservative scenarios from Messari, The Merge will activate in November-December.
Analysts expressed confidence that after the upgrade Ethereum will no longer be perceived as a "utopian experiment. On the contrary, the cryptocurrency will attract long-term investors.
Messari admitted that the staking fee will be in the range of 7%-13%. Future Development
After the activation of The Merge, an important event will be the Shanghai hardforge. It is intended to increase the scalability of the network, make stacked funds available, and modernize the Ethereum Virtual Machine (EVM).
In March, Vitalik Buterin shared the idea of Proto-danksharding, a data validation scenario focused on transactions carrying so-called blocks that cannot be executed by EVMs.
Proto-danksharding is intended to replace danksharding, a sharding technique in which only one proposer selects all transactions and data falling into a particular slot. This approach was introduced in February 2022 by Ethereum Foundation researcher Dankrad Feist.
The Ethereum founder suggested automatically deleting large binary object data every Z0 days so that the network does not place too many demands on data and memory storage.
There is also EIP-4488, aimed at extending the use of Ethereum-based Rollups. This relatively simple solution was originally planned to be implemented before The Merge was activated. EIP-4488 reduces by a factor of five the cost of sending transaction packets from Layer 2 networks to the Ethereum blockchain. "Although The Merge is the most complex upgrade in Ethereum history, it is not the last network upgrade," Galaxy Digital Research stressed.
After that, the researchers believe, developers will focus on other pressing, years-old issues like scalability and statelessness.
Galaxy Digital Research also predicted other consequences of Ethereum's move to PoS:
- The popularity of GPU-based cryptocurrency mining will decline. Some miners will switch to alternative coins like Ethereum Classic or Ravencoin. Many will simply sell video cards, which will then go to gamers and designers. This will lower the price of the devices on the market and affect the profits of the manufacturers.
- Bitcoin, which remains the largest PoW cryptocurrency, will be even more criticized for the high power consumption of the network.
According to optimistic predictions, The Merge is expected to be activated in August. However, given the technical complexity of the merger process and the propensity of developers to postpone upgrades, this event could also take place in the deep fall.
One of the most significant consequences of the move to PoS will be the attrition of miners from the game. This could significantly affect market conditions in the short term. Sales pressure is likely to decrease and hash rates of altcoins like Ethereum Classic will increase.
In the medium to long term, Ethereum could become a more investable cryptocurrency. First, the project will prove to be anti-fragile. Secondly, the asset will comply with the trend towards environmental friendliness.
Finally, deflation will definitely do its job. However, its level will depend on user activity.
The Merge is not the last important update of Ethereum. It will help to solve the problem of scaling, where the big role is given to sharding and Rollups.