Why I Am Optimistic About Ethereum Merge - How To Leverage Your ETH

By BFab | Good vibe | 26 Aug 2022

After having written a few articles on the best alternatives to Ethereum (ETH) if the merge fails, I will give you a few reasons to be optimistic about The Merge and will give you some strategies to leverage your ETH in the meantime.

Reasons To Be Optimistic About The Merge

The recent Ethereum testnets have all been successful. The "state corruption" bug found in Geth software’s mainnet-merge program has been fixed. Some additional bugs might happen until the Merge. However, there are so many Ethereum developers working on it that a major bug is quite unlikely.

Furthermore, the Beacon (Proof-of-Stake) chain, which will replace the existing Proof-of-Work, already exists and has already more than 400k validators:

Concretely, it is more than on any other existing blockchain including Bitcoin (BTC) which currently has 45k nodes. On top on that, taking into account that each validator has staked at least 32 ETH (minimum staking requirements) and that some of them have staked much more than that (e.g., the large liquidity pools like Binance, Coinbase or Kraken), it gives you a rough idea of how much ETH has been staked on Beacon chain. To be precise, the total amount of ETH deposited to the Beacon chain is currently standing at over 13.3 million, which represents 11.18% of Ethereum's circulating supply.

Therefore, it is significant enough to create a global crypto crash if there was any problem in Beacon chain. If the Merge fails, all the cryptos will fail.

Another important factor is the environmental impact of Proof-of-Stake (POS) vs. Proof-of-Work (POW). Most of the large VC (Venture Capital) firms have not yet invested in Ethereum due to its environmental impact. There are waiting for the Merge and the transition to POS consensus to invest in it. This environmental issue impacts all the use cases of Ethereum, for instance the NFTs. Joanie Lemercier, a French artist, calculated that selling one NFT was the equivalent of powering her art studio for two years and estimated that a sale taking only 10 seconds consumed 8.7 megawatt-hours of energy.

This environmental impact has prevented some of the VCs from investing into Ethereum till now and due to this issue, some of them, like a16z, preferred POS blockchains like Solana (SOL) or Avalanche (AVAX). It is mainly a question of image. After the Merge, which is expected to occur around September 15, a large part of these VCs will migrate from the POS chains in which they previously invested to Ethereum which will be the largest existing POS chain.

How To Leverage Your ETH

If you believe in the success of a hard fork leading to Ethereum POW in parallel of the official Ethereum POS one, you can hold your ETH on Ethereum blockchain, e.g., through MetaMask. However, you need to be aware that withdrawing Ethereum POW will be risky due to the potential replay attacks... A relatively safer option (regarding the replay attack risk, only) could be to hold your ETH on a centralized exchange like Binance which already announced they will support any potential Ethereum POW hardfork. However, you need to be aware that ETHW price (which represents the price of the future ETH POW if any), which can already be traded on Poloniex, is only $44 currently, i.e., less than 3% of ETH price. Therefore, the potential gain by holding ETH and waiting for a POW hard fork is less than 3% of your ETH holdings, and this value may decrease when we get closer to The Merge. Another way to leverage your ETH is simply to lend it on decentralized lending protocols, since many traders will borrow it just to bet on the hard fork with it, which will likely increase the interest rates on these protocols. You can expect to earn more than the previous 3% by doing that. Please safely check the protocols...

In summary

There are good reasons to be optimistic about The Merge, although you can also be skeptical & invest in the alternatives to ETH in case The Merge fails.

Disclaimer: this article does not contain any financial advice. The information is provided for general informational and educational purposes only.

Please find below a few links to earn a few coins...