likely renewed interest in staking with the merger

Ethereum is in the final stages of preparations to transition from a proof-of-work (PoW) type consensus mechanism to a proof-of-stake (PoS) type mechanism. This event, called a “merger”, is expected to bring several benefits to Ether (ETH), the native token of the Ethereum blockchain.

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According to an article by chain analysis, one such benefit is that the merger could spark renewed interest in ETH staking. Indeed, ETH staking is already very popular. More than 30 billion USD in ETH are staked on Ethereum 2, making it the largest blockchain in terms of staking volume, even before the switch to PoS.

When PoS is fully introduced, the attractiveness of staking is expected to increase even further, as users across the Ethereum ecosystem will be more comfortable abandoning PoW and embracing the more environmentally friendly PoS.

Furthermore, the updates expected after the merger will allow users to withdraw their ETH at will instead of having to lock their assets. This, in addition to an expected annual return of 10-15%, will mean more liquidity for stakers.

These prospects, including reduced climate impact and anticipated return on investment from staking, should also attract institutional investors according to the blockchain analytics service provider. On-chain data already indicates that institutional buyers (portfolios that have placed over $1 million worth of ETH) have been steadily increasing.

“In addition to the increase in staking as a whole (…) the activity of institutional investors will have to be carefully monitored,” the report said.

Risks remain for Ether after the merger

Despite these benefits, the crypto community is also wary of the risks the merger could pose to ETH. The possibility of a miner rebellion that could lead to a blockchain split, as well as the fact that dApps (decentralized applications) holding over $50 billion in funds could be at risk if the merger goes wrong are a few. -some of the risks that have been mentioned.

However, Joe Lubinco-founder of Ethereum and founder of the blockchain company Consensys, has minimized these risks. Speaking to Time, Lubin said that even if a “hard fork” happens, it will only be temporary and he expects the upgrade to go smoothly.

“I think a temporary fork is likely‚Ķbecause there are plenty of opportunists. But I can’t imagine wanting to build anything, or commit anything significant, to a chain where so many elements are fundamentally broken. and abandoned,” Lubin told the magazine.

The merge, which kicked off with the Bellatrix upgrade, is expected to be fully completed between September 13-15, 2022.

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