If no further obstacles arise, Vitalik Buterin, co-founder of the Ethereum network, recently warned investors that the merger may happen as soon as August 2022. Despite previous delays, the Beacon chain, which runs in parallel with the Ethereum mainnet, is now ready to join with the ETH blockchain and migrate to proof-of-stake.
Can the merge be a disaster for the ETH blockchain?
While supporters dispute whether Ethereum will be able to complete the merger, the Beacon chain recently saw a “block reorganization” event that lasted seven blocks in the last week of May 2022. Between 08:55:23 and 08:56:35 AM UTC, seven blocks numbered 3,887,075 to 3,887,081 were knocked out of the Beacon Chain, according to data from Beacon Scan.
When a block in the chain is knocked “off-chain” by a competing block, a reorg occurs. This can happen as a result of a glitch or an attack from a miner with a lot of resources. The reorganization could result in an unintended fork or duplicate of the underlying blockchain, which is a potentially dangerous result of a block being removed.
This is a major event because it hasn’t happened in some years and caused a momentary crisis of confidence in the community.
Proponents are left to wonder if the merger would be disastrous for the Ethereum network. The Beacon chain block reorg was traced down to out-of-date node clients.
According to Preston Van Loon, an Ethereum core engineer:
This reorg is not an indicator of a flawed fork choice, but a non-trivial segmentation of updated vs out of date client software.
The reorganization has generated concerns in the community about the timeframe for the merger, as Van Loon, Tim Beiko, and Vitalik Buterin have previously stated that there may be a delay if complications arise.
Kraken’s Jesse Powell is optimistic about the Ethereum merger’s prospects.
While Ethereum core developers and the community are working diligently to make the merger a success, Jesse Powell, CEO of Kraken, told Decrypt that he is unconcerned about delays.
While proponents lament the delays, seeing them as a sign that the developer community isn’t up to the task, there are concerns that the problem with transaction fees will only be solved once the merge is completed.
One of the reasons institutional finance and initiatives are pouring into Ethereum alternatives like Solana, Cardano, and Avalanche is the escalating transaction costs. For the DeFi and web3 communities, as well as proponents of proof-of-stake, the Ethereum merger represents a high-stakes event.
Powell is unconcerned with the various delays in the Ethereum merger process, believing that for an event of this magnitude, success is more crucial than speed.
Why is merging important for lowering transaction fees?
The Ethereum network’s goal is to reduce transaction costs and alleviate worries in the Ethereum community. The merger represents a major step in that direction, shifting consensus methods to proof-of-stake, which is less energy-intensive and more effective.
According to experts, the merger is one of the most important moves toward lowering gas rates on the Ethereum blockchain, layer-2, and sidechain networks. Reduced network costs could effect projects like Polygon Network, the Ethereum scaling solution, and layer-2 solutions like Optimism, Boba Network, and Arbitrum One.
Layer-2 protocols complete more transactions per second at lower gas rates since they process transactions independently, and they are then added to the Ethereum blockchain at a later time. The switch to proof-of-stake would eliminate the requirement for layer-2, and the Ethereum blockchain would be able to execute more transactions at a lower cost.
Proof-of-stake, according to Vitalik Buterin:
Greater efficiency and their better ability to handle and recover from attacks.
Alan Chiu, CEO of Boba Network, a layer-2 optimistic rollup said:
As Ethereum L1 becomes more efficient, L2’s will simply become that much more efficient right alongside, all while maintaining their current added benefits.
Ethereum on ETH2 contract hit an all-time high
The ETH2 deposit contract has been staked with 10.73 percent of Ethereum’s circulating supply. A total of 398,000 distinct validators have staked a total of $12.76 million ETH, a new high. The amount of Ethereum staked on the Beacon chain has reached yet another significant milestone, demonstrating investors’ and market participants’ anticipation for the merger.
Ethereum investors continue to accumulate enormous amounts of ETH
Ahead of the merger, Ethereum holders have continued to accumulate the largest altcoin. The number of addresses holding at least 10 ETH has reached an 18-month high, according to statistics from crypto intelligence platform Glassnode. These addresses have a total of 291,608 ETH in their possession.
The large accumulation of Ethereum by holders shows that investors are unfazed by the altcoin’s recent price drop. The story of ETH accumulation has been bolstered by the fact that 54 percent of Ethereum holders have seen huge gains.
What’s next after the merge?
Puff, a contributor to the Iron Bank, an Ethereum-based lending platform, feels that improved scaling prospects will boost ETH capacity. Puff argues:
Would bring us one step closer to shard chains. With sharding deployed, we anticipate that the improved scalability and capacity on Ethereum will reduce costs and increase the accessibility of decentralized applications.
Experts predict a rise in Ethereum network involvement, with increased use of decentralized applications, scalable and rapid transaction processing, greater individual sovereignty over their own assets, and a higher degree of decentralization.
Layer-2 solutions, rather than becoming obsolete, will become a major catalyst for the Ethereum blockchain’s potential. According to Tyler Perkins, CMO of zkSync, the merger will have no impact on layer-2 solutions.
L2s will be most impacted by sharding, which is planned for after the merge, as it will increase the amount of data storage available to rollups, dramatically increasing their throughput.
Ethereum’s price is expected to fall in June 2022, according to analysts
Ethereum has a bearish forecast in June 2022, based on on-chain activity, fundamental, and technical aspects. A drop in the price of Ethereum could be caused by two major factors.
Experts believe that a surge in DeFi could boost Ethereum’s price, as the altcoin has lost a significant amount of value across its dApp ecosystem. The total value locked (TVL) on Ethereum network-based apps is $68.71 million as of June 5, which is 65 percent of DeFi TVL.
The enormous collapse of Terraform Lab’s sister tokens LUNA Classic (previously LUNA) and UST led in a significant retreat from Ethereum’s TVL, which had been hovering above $100 billion before to Terra’s collapse. TVL is expected to fall further in June 2022, according to analysts.
The bearish indicators from technical analysis of the Ethereum price chart are the second important aspect. The price of Ethereum has been fluctuating inside a range established by a falling resistance and a horizontal trendline support. The pattern is known as a descending triangle, and analysts have projected that the price of Ethereum will continue to fall.
After Ethereum price breaks strongly below its support trendline, the descending triangle may resolve, with the triangle’s maximum height being reached. If the price of Ethereum falls below the lower trendline of the falling triangle, it might fall to $1,350 in June 2022, a 25% drop from current levels.
In the immediate term, the Ethereum price forecast is bullish, as the altcoin had one of the largest liquidations in recent months, with $800 million worth of orders disappearing off the market. A squeeze occurred as a result of the massive volume of liquidation, and Ethereum price bounced off support at $1,715 to touch $1,900.
The total rate of liquidations in Ethereum reveals that bulls are in control of the market, with short positions accounting for 90% of all orders pulled out.
Disclaimer: The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of EGG Finance. Every investment and all trading involves risk, so you should always perform your own research prior to making decisions. We do not recommend investing money you cannot afford to lose.