Anticipating the most significant upgrade up to date, the industry's second-largest cryptocurrency by market capitalization briefly topped $2,000 for the first time since May. However, despite the general excitement around Ethereum's upcoming upgrade, The Merge, which would consolidate two blockchains — mainnet Ethereum and Beacon Chain — in the last 24 hours, the price of Ethereum (ETH) slumped by 5%.
Top 5 concerns ahead of The Merge activation in Ethereum (ETH)
While it is tempting to paint Merge as the industry saviour, the situation is somewhat more complex, leaving the crypto folk slightly confused about the future. In today's editorial, we will look at the five main misconceptions about the Merge and see how other sectors of crypto, like DeFi, would be affected by it. Let's dig in.
While the reduced gas fees are at the top of every investor's list, it is still the biggest misconception among investors and the crypto community. The Merge is a change of consensus mechanism that will transition the Ethereum blockchain from Proof-of-Work (PoW) to Proof-of-Stake (PoS). To lower gas fees in Ethereum, the developer community is working on a rollup-centric roadmap to make transactions cheaper.
Unfortunately, Ethereum transactions will not be noticeably faster. However, it is also true that Beacon Chain allows validators to publish a block every 12 seconds, which on the mainnet is around 13.3 seconds. While PoS will enable a 10% block production, this will be unnoticed by users.
Since most of the misconceptions are positive, this contrasts with this particular one, where it is rumoured that the planned upgrade will momentarily take down the Ethereum blockchain. However, developers anticipate no downtime to occur as blocks would make a transition from PoW to PoS.
Staked ETH (stETH) essentially refers to a cryptocurrency backed 1:1 by ETH, which currently lies locked on the Beacon Chain. While the Ethereum community would love to withdraw their stETH, it was confirmed by developers that the upgrade does not facilitate this change. This means these holdings will be made available in the next major upgrade after the Merge, the Shanghai upgrade, which is set to occur in the next 6-12 months.
While stETH remains blocked for investors, validators will immediately access the fee rewards and maximal extractable value (MEV) earned during block proposals from the execution layer or Ethereum mainnet.
Since the fee compensation will not be newly issued tokens, it will be available to the validator immediately.
The immediate answer is that the DeFi sector of crypto would not be affected as much as most people think. The Merge will mainly affect the Ethereum network, and while many Dapps exist on the Ethereum blockchain, the users would not feel much difference, especially if a project is built on a different blockchain.
However, this should not discourage you from trying new projects in the DeFi space, including the likes of Revolutux (RVLT) . This new project wants to amalgamate DeFi, NFTs and DAO (decentralized autonomous organization) to produce the next-generation platform.
According to CryptoMode, Revolutux is a decentralized cryptocurrency built on the BNB Smart Chain that functions as a deflationary coin. The interplay between Reflection, Liquidity Pool (LP) Acquisition, and Burn will clear price volatility and bring more farming incentives for the platform's users.
To follow recent industry trends with NFTs, Revolutux will introduce its own marketplace, where users can mint unique JPEGs. The marketplace will also facilitate the trade of these NFTs for fiat currency and cryptocurrencies across the board.
The Merge will undoubtedly be a significant event not only for the Ethereum Believers but for the broader crypto community, albeit it would not be as revolutionary as some people want it to be. And while its impact on DeFi and other sectors might not be immediate, its success will lay the foundation for the industry's future for years to come.
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