- Some investors have preconceived myths relating to gas fees, staking, network economy, and much more following the Merge upgrade.
- Here are the five common myths that investors need to clear before The Merge upgrade in September.
Last Friday, Ethereum developers announced that they are likely to implement The Merge upgrade on the Ethereum mainnet in the week of September 19. Over the last week, ETH has registered a strong rally gaining more than 40 percent in seven days. As of press time, ETH is trading at $1,550 with a market cap of $187 billion.
Although the euphoria within the Ethereum community is high for the upcoming Merge event, investors still have some myths about The Merge upgrade. Popular market analyst Lark Davis shares those five things that investors are getting wrong about the Merge upgrade.
1. The Merge is going to lower fees
Lark Davis explains that this is one of the biggest myths that the high gas fee situation in Ethereum will subside after The Merge. The ETH gas fee has been trending lower recently. However, this has been due to the drop in network activity this year in 2022. However, Davis believes that we are just one NFT pump away from congesting the Ethereum network thus driving gas fees higher.
Thus, there would be no major relief until we have new scale networks like Sharding built directly into the mainnet. This will probably happen sometime in 2023.
2. Flooding to staked Ethereum
Some investors believe that the market will be flooded with staked Ethereum after the Merge upgrade. However, investors won’t be able to withdraw staked Ethereum for 6-12 months after the Merge upgrade. Also, not all of the staked Ethereum gets unlocked at the same time. A maximum of 40,000 ETH per day will unlock out of the 13 million ETH supply.
3. The Merge will not change the economics of Ethereum
Many investors believe that The Merge upgrade will not change the economics of Ethereum, which is wrong as per Davis. He adds: “In fact, the Merge is the most significant economic event to happen to Ethereum”. Davis says that this is because the Merge comes along with the triple halving.
This will reduce the emissions of newly minted Ethereum by a factor of 10 from the current inflation rate. Thus, it will also reduce the daily sell pressure for Ethereum by a factor of 10.
4. Staking rewards will go down after The Merge
This is another misconception among Ethereum investors. Davis says that the estimates show that staking rewards will increase by 50 percent after the Merge. Some estimates also show that investors can earn 10 percent APY on Ethereum staking post Merge. This is because, after the PoS transition, all the transaction fees will shift from miners to stakers.
5. Ethereum network will be less secure after The Merge
There has been a long-going debate between PoW and PoS supporters on which is more secure. Davis says that trying to attract the Ethereum network under the Proof-of-Stake system will cost much more. This is because, in PoS, one needs to buy tens of billions of dollars worth of coins to gain the staking majority and attack the network. Even if the attack succeeds, the attackers will lose major money. Davis believes that Ethereum will be more secure under a PoS network.
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