What will 'The Merge' update do to Ethereum?

All the crypto industry is talking about right now is 'The Merge' update. Ethereum's transition from proof-of-work [PoW] to proof-of-stake [PoS] is widely anticipated by the entire community. Amidst all the hustle and bustle, many of the investors don't know what to expect from Ethereum after the update. However, Citi prepared a report that shed light on this.

Here are four things that 'The Merge' update will bring to the Ethereum blockchain

• Speed

Over the years, there has been an increase in the demand for cryptocurrencies. This slowed down the block generation time or transaction speed. While an ETH transfer ideally takes 15 seconds, it can take days if the network is congested.

The Merge could increase transaction speed by 10 percent by reducing block time, he says Citi. The overall speed issue would then be fixed with the next Surge update. The report further pointed out that Surge intends to bring 100,000 transactions per second [TPS] to the Ethereum blockchain. At the time of writing, the network is doing 10.59 TPS.

• Fees

High fees and Ethereum go hand in hand. For several years, the high fee of ETH has been a problem for many users. However, there has been a significant decline in the last few months.

Additionally, "The Merge" is expected to see block time drop to 12 seconds from 13 as previously mentioned. There is therefore speculation about a slight reduction in fees.

• Deflationary and income

The term "store of value" is often associated with Bitcoin [BTC]. However, an "enhanced value store" might come in handy now. Citi noted that after the switch to PoS, total ETH issuance would drop by 4.2 percent per year. This would make ETH a deflationary asset.

Furthermore, "The Merge" is expected to turn the world's largest altcoin into an "income-bearing asset." The Bank believes that a number of valuation methods could be used with the network's cash flows or revenues.

• Environmentally friendly

The entire crypto ecosystem is aware of the mining environmental impact feedback that Bitcoin has received over the years. PoW currencies have been criticized by many for their power consumption. While there are now more efficient ways to mine BTC, Ethereum has decided to take a step back. Since PoS does not require mining or miners, its energy consumption is also reduced.

Citi points out that after 'The Merge', the grid's energy expenditure could be reduced by up to 99.95 percent.

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All content in this article is for informational purposes only and does not in any way serve as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.