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Here's How Ethereum (ETH) Economics Will Be Affected by Merge: Report

Sun, 07/31/2022 - 15:16
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Vladislav Sopov
Web3 VC heavyweight Amber Group summarized some thoughts on future of post-Merge Ethereum (ETH) in terms of its economics
Here's How Ethereum (ETH) Economics Will Be Affected by Merge: Report
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Amber Group, a VC conglomerate focused on investing in crypto and Web3 startups, has released a report to cover the possible effects migration to PoS can have for Ethereum's (ETH) economical design.

Here's who will benefit from post-Merge Ethereum (ETH)

First of all, Amber Group experts attempted to calculate Ethereum (ETH) staking APY rate "as if the Merge happened today." According to their estimations, ETH stakers can get up to 8.47% in APY for locking their riches in the Beacon Chain mechanisms.

Miner Extractable Value or MEV ("miners tax") will be siphoned by the validators that will manage to propose blocks in the periods of increased volatility. 

Also, MEV extraction will be among the most influential centralization factors in post-Merge Ethereum (ETH) together with DoS-mitigation opportunities. As of July 2022, Ethereum PoS Beacon Chain staking looks heavily centralized, with Lido Finance dominating.

Ethereum on Proof-of-Stake: Comprehensive Guide to The Merge

As covered by U.Today in a recent guide, Ethereum (ETH) is set to migrate to a proof-of-stake (PoS) consensus from a proof-of-work (PoW) one in September 2022.

Ethereum Classic (ETC) will not accept ETH hashpower exodus

That said, Ethereum (ETH) miners will be forced to either leave their business or migrate to another blockchain that utilizes the Ethash algorithm. Mainly, this would mean the run to Ethereum Classic (ETC) mining. This trend brought ETC back to the top 20 cryptos by market capitalization, as explained by U.Today.

Ethereum Classic Back in Top 20 After 60% Rally

However, some miners signaled their support for a hypothetical proof-of-work (PoW) fork of old Ethereum (ETH). However, it is highly unlikely that Ethereum (ETH) DeFi and the stablecoin infrastructure will somehow keep using proof of work.

Also, the coexistense of two Ethereum (ETH) ecosystems of tokens and apps will result in major issues such as IP rights, the Amber Group representative added.

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About the author

Blockchain Analyst & Writer with scientific background. 6+ years in IT-analytics, 3+ years in blockchain.

Worked in independent analysis as well as in start-ups (, Monoreto, Attic Lab etc.)