The long-awaited merge on the Ethereum (ETH) network is getting closer. According to the giant US bank Citigroup, a number of changes will be made that could make ethereum quite interesting for both investors and users.
Ethereum merge
At this point, the merge is expected to make an appearance sometime in September of this year. This update is one of the most anticipated in the history of the crypto industry, and for good reason. There is a chance that the changes that the update will bring about will have a positive impact on the price of ETH.
Citigroup is also closely monitoring the situation. The bank recently published a report outlining what they expect the effects of the merge to be, that reports CoinDesk. The results are not good.
For example, according to the report from Citigroup, the energy consumption of the Ethereum network will plummet by 99.95%. This has everything to do with the fact that the network will move from a proof of work (PoW) consensus model to a proof of stake (PoS) consensus model. Basically this means that it mine of ether tokens will be a thing of the past, resulting in a drastic reduction in energy consumption.
Ether deflation?
However, the Citigroup report also addresses another aspect that may be equally significant. The bank points out that the Ethereum network may be subject to deflation after the merge.
So what exactly does that look like in practice? At present, through the mining process issued a constant stream of new ether tokens. That means that the total circulation of tokens increases every year. So inflation.
After the merge, the mining process will no longer exist and so hardly any new ether tokens will be created. This in combination with the existing burning process In the future, according to Citigroup, the total circulation of ether tokens will shrink by 4.7% annually! According to the law of supply and demand, this obviously suggests interesting things for the price of ethereum.