The Bullish Ethereum Merge Pump
Note: Well, this is something I had in my mind for quite some time and I wanted to write it down. Finally got some time and here it is. I hope you enjoy and feel free to comment. I'm trying to get used to write articles on a regular basis and get better at it. So thanks in advance!
The transition from proof-of-work to proof-of-stake (POS) puts some big questions marks on the second biggest blockchain (in terms of market cap).
To my mind the biggest are:
How this merge is going to affect all the miners (that spent a ridiculous amount of time effort and money to compete with each other trying to solve the mystery of the block and earn the sweet rewards)?
Will miners split the Ethereum blockchain again (Ethereum Classic, Ethereum X, then Ethereum)? (Looks like there will be a coca cola kind of issue here... which one will you go for: coca cola classic, zero, diet/light, ... ?)
Will miners go to Ethereum classic?
If so, are we expecting to see a massive pump in ETC?
Will miners move to other similar blockchain?
The only issue with this is that the miners bought specific ASICs. ASIC stands for Application Specific Integrated Circuit which means that it will only run a specific program (normally the one that solves the ETH POW problems). Can miners flash and reuse the ASIC?
Will other blockchains try to get advantage of this situation and try to be the target of these miners by adopting the old ETH way?
In terms of POS, other blockchains implemented this approach first and worked like a charm. People were able to stake their coins without issues. Do not get me wrong! I'm not saying that one blockchain is better than another. Every blockchain is different (programming language, business model, approach, scalability, roadmap, etc.) But, so far, in order to be eligible to stake ETH2 you need to lock 32ETH.
Well, I don't know about you, but unfortunately I don't have ~USD$64k laying around (also worth mentioning that the lock is set until specific date so, you will not be able to retrieve them prior the date. Yikes!). So, so far for me, ETH2 staking is way out of the map.
Now... not everything is bad news. POS brings better usage of the network and allows to use less resources from the machines. However, another issue that I still have not figured out is how this merge will affect the gas fees. Mainly because users can set gas fees higher than normal to get their transaction validated first. So, will ETH2 still allow this situation? If so, does this mean that ETH is limited in terms of TPS and the only way to mitigate this is by paying more fees? I guess scalability should solve this problem, and yes... POS brings a lot of benefits, but I still wonder in terms of scalability how well designed this change has been done and if there are any trade offs. And those last ones scare me... a lot. Even though we can see on the roadmap that gas fees have been left out to one of the last bits on the blockchain (whoopsie!)
https://ethereumroadmap.com/
To me, trading "being the first in the market" for "verification, validation and security of the solution" is never a good approach. In this line of work, doing well these thing once and addressing them first, saves lots of patching, maintenance and costs! Remember that at the end of the day, many people use this technology to gamble and try to get rich quick. So not addressing problems with security lead most of the time big shocking news about hacking (Oh noes!)
Ok so... To sum up, in the long term, everything looks super bullish, but I wonder if people will follow this massive pre merge pump. To me this seems to be the classic "buy the rumors, sell the news" but who knows!?
Thanks for reading this and hopefully we see each other on the other side of the metaverse!
Until next time stay safe and be blessed.
Iggy out!
(PS: Photo by Jievani: https://www.pexels.com/photo/sign-industry-internet-metal-8175569/ )