Citi Believes The Merge Will Make Ethereum a “Yield-Bearing Asset”

Citigroup Inc. or Citi, an American multinational investment bank, disclosed that the merge would make Ethereum (ETH) a deflationary asset.

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As a result, the second-largest cryptocurrency will become a “yield-bearing asset.”

The transition from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism called the merge is speculated to be the biggest software upgrade in the Ethereum ecosystem. 

 

Citi’s research report pointed out that the merge would slash the overall Ether issuance by 4.2% annually, making it deflationary. Therefore, shifting to a PoS consensus mechanism would enhance Ethereum’s quest to become a store of value. 

 

Crypto service provider LuckyHash had previously shared similar sentiments by noting that the merge would prompt a 1% annual deflation rate, Blockchain.News reported. 

 

Market analyst Lark Davis was of a similar opinion that a PoS framework would trigger a supply growth rate of -2.8% in the Ethereum network.

 

By becoming a “yield-bearing asset,” Citi stated that Ethereum would experience more cash flows. As a result, prompt more valuation methods that were not available before. 

 

The report noted:

“Because Ethereum will be both yield-bearing and deflationary, it is less likely to be the blockchain with the highest throughput. Given its “enhanced store-of-value properties,” it is more likely to be where a growing amount of total value locked is secured and transacted.”

In the post-merge era, Citi expects ETH to be more environmentally friendly and energy-efficient. Moreover, Ethereum might experience a scalable future through sharding.

 

During a recent developers’ call, September 19 emerged as the most probable date for the merge.

 

Meanwhile, a DeFi educator under the pseudonym Korpi opined that the merge would be a game-changer because it would shift the selling pressure experienced in the Ethereum network

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Buying Pressure Builds up on Ethereum Network, Pushing Price Above $1,300 Amid Merge News

Ethereum (ETH) experienced notable momentum that drove the price above $1,300 after news of the much-anticipated merge made the airwaves.

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The second-largest cryptocurrency based on market cap was up by 13.35% in the last 24 hours to hit $1,358 during intraday trading, according to CoinMarketCap

 

The merge is expected to transition the Ethereum network to a proof-of-stake (PoS) consensus mechanism from the current proof-of-work (PoS) framework, which has been elusive for a few years.

 

Previously, Ethereum researcher Justin Drake revealed that the merge was likely to happen in August because testing was in the final round. 

 

Nevertheless, during a recent developers’ call, September 19 emerged as the most probable date for the transition. It was stipulated:

“Merge two weeks later (Sept 19th).”

An Ethereum Beacon Chain community health consultant, however, hinted that the merge date was not final and said:

“This merge timeline isn’t final, but it’s extremely exciting to see it coming together. Please regard this as a planning timeline and look out for official announcements.”

Therefore, this news made the ETH market rally powerfully. On-chain insight provider Glassnode explained:

“Ethereum markets have rallied strongly off the back of a large short squeeze in futures markets. Over $98M in short futures positions were liquidated in one hour, pushing ETH prices up by 12.5%.”

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Source:Glassnode

 

The merge is estimated to be the biggest software upgrade in the Ethereum ecosystem because the PoS algorithm will allow the confirmation of blocks in a more energy-efficient way. Therefore, validators are required to stake Ether instead of solving a cryptographic puzzle. 

 

A DeFi educator under the pseudonym Korpi recently opined that the merge would be a game-changer because it would shift the selling pressure experienced in the Ethereum network. After all,  structural supply will change to structural buying.

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Will Ethereum Merge Trigger a Shift from Selling to Buying Pressure?

The merge of Ethereum (ETH), which is expected to complete the transition from the current proof-of-work (PoS) consensus mechanism to a proof-of-stake (PoS) framework, has been elusive for quite some time.

Nevertheless, a DeFi educator under the pseudonym Korpi believes it will be a game-changer because it will shift the selling pressure experienced in the Ethereum network, given that structural supply will change to structural buying. The educator explained:

“The Merge is a substantial change in supply or demand forces most people underestimate. Multiple Ms of daily sell pressure on ETH will be replaced by buy pressure. Every day we will need new sellers to prevent the price from going up.”

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Source: Korpi

The DeFi educator also acknowledged that if the merge happened today, the $10 million of daily selling pressure witnessed in the Ethereum network would be changed to $8 million of buy pressure. Korpi added:

“Let’s confront structural supply and structural demand on a daily basis. PoW: Daily Sell Pressure: $19M Daily, Buy Pressure: $8.5M, Net: $10.5 of SELL PRESSURE every day. PoS: Daily Sell Pressure: $0.3M, Daily Buy Pressure: $8.5M, Net: $8.2M of BUY PRESSURE every day.”

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Source: Korpi

Since the merge will bring both chains together, Korpi believes this will trigger a 90% issuance reduction, which will prompt a supply deficit. The educator noted:

“Every day ~13,200 ETH is issued to miners on PoW chain and ~1,590 ETH to stakers on PoS chain. ~14,790 new ETH daily corresponds to a 4.5% annual issuance rate. At the Merge block, both chains ‘merge’ into one, and the PoS era begins.”

Previously, analyses have shown that the merge will trigger a deflation rate in the ETH ecosystem based on slashed supply. 

For instance, crypto service provider LuckyHash stated that a proof-of-stake consensus mechanism would prompt a 1% annual deflation rate, Blockchain.News reported. 

Similar sentiments were shared by market analyst Lark Davis who opined that the merge would trigger a supply growth rate of -2.8% in the Ethereum network.

With Ethereum researcher Justin Drake recently disclosed that the merge is expected to work in August because testing was in the final stages, it remains to be seen how things shape up in the ETH ecosystem. 

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Ethereum Merge Might Happen in August as Testing Enters Final Round

Speaking at the Permissionless 2022 Conference in Florida, the U.S., Ethereum Researcher Justin Drake disclosed that the merge of Ethereum (ETH) might happen in August.

Market insight provider Bankless pointed out. He noted:

“Strong desire to make this happen before difficulty bomb in August. Stars are aligned.”

Meanwhile, Ethereum core developer Preston Van Loon shared similar sentiments that testing was in the final stages and said:

“As far as we know, if everything goes to plan, August—it just makes sense. If we don’t have to move, let’s do it as soon as we can.”

The merge, which will transition the current proof-of-work (PoS) consensus mechanism to a proof-of-stake (PoS), has been elusive because it was slated for June.

Previously, Ethereum lead developer Tim Beiko revealed that the shift would not happen in June as planned. He pointed out:

“It won’t be June, but likely in the few months after. No firm date yet, but we’re definitely in the final chapter of PoW on Ethereum.”

The merge is estimated to be the biggest software upgrade in the Ethereum ecosystem because the PoS algorithm will allow the confirmation of blocks in a more energy-efficient way. After all, it requires validators to stake Ether instead of solving a cryptographic puzzle. 

Validators will take up the role of miners when it comes to the confirmation of blocks based on the amount of ETH staked, acting as collateral against dishonest behaviour. 

The merge is usually regarded as a game-changer that will give the Ethereum network a new face because it is expected to enhance scalability through upgrades like sharding.

Furthermore, it is anticipated to strengthen Ethereum’s quest as a deflationary asset because the second-largest cryptocurrency’s value is speculated to increase based on slashed supply. 

Market analyst Lark Davis had previously opined that he expected the merge to trigger a supply growth rate of -2.8% in the Ethereum network. Moreover, a LuckyHash study noted that the shift would prompt a 1% annual deflation rate. 

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ESMA Top Executive: The EU Should Ban Proof-of-Work Mining

The vice-chair of the European Securities and Markets Authority (ESMA) – Erik Thedéen – urged the EU financial regulators to prohibit the cryptocurrency mining model known as proof-of-work. He also claimed that bitcoin has turned into a “national issue” for his homeland Sweden because of the amount of renewable energy devoted to mining the asset.

‘The Solution Is to Ban Proof-of-Work’

In a recent interview for the Financial Times, Erik Thedéen (also Director-General of Sweden’s FCA) opined that cryptocurrencies employing the proof-of-work mining methodology pose significant risks to the environment. As such, European regulators should encourage the proof-of-stake model, which is less energy-intensive:

“We need to have a discussion about shifting the industry to a more efficient technology. The solution is to ban proof-of-work. Proof-of-stake has a significantly lower energy profile.”

It is worth noting that the two largest digital assets by market capitalization – Bitcoin and Ether – rely on the proof-of-work mining technology. However, Ethereum is on its way to upgrading the network to Ethereum 2.0 as the transition is expected to happen this summer. Following the development, the second-largest blockchain protocol will start utilizing the proof-of-stake method and thus become more green-focused.

Bitcoin, though, has no plans to switch its mining model. Thedéen said the primary digital asset is now a “national issue” for Sweden because a considerable percentage of renewable energy is currently dedicated to mining it. The ESMA exec thinks Swedish electricity should be employed in creating traditional services and not BTC:

“It would be an irony if the wind power generated on Sweden’s long coastline would be devoted to bitcoin mining.”

Erik Thedéen
Erik Thedéen, Source: Nord News

The Good Side of BTC Mining

In October last year, the authorities of the Canadian town North Vancouver decided to employ the energy released from bitcoin mining into heating residential and commercial buildings. The initiative should see the light of day during the first half of 2022 as it was supported by the joint efforts of Lonsdale Energy Corporation (LEC) and the local digital asset miner MintGreen.

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The latter asserted that its “Digital Boilers” could prevent 20,000 tones of GHGs from entering the atmosphere per MW compared to natural gas.

In turn, Karsten Veng – CEO at Lonsdale Energy Corporation – raised hopes that the collaboration will be beneficial for the Canadian town, home to nearly 50,000 people, and for the environment:

“LEC is on a journey to lower greenhouse gas emissions, and this project will be part of that.”

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Dogecoin Foundation Joins Forces With Vitalik Buterin to Build Community Staking

The Dogecoin Foundation, a non-profit organization dedicated to the growth of popular meme-inspired cryptocurrency Dogecoin (DOGE), has joined forces with the founder of Ethereum, Vitalik Buterin. The idea is to design a “Community Staking” system based on the Proof-of-Stake (PoS) consensus mechanism.

This comes months after the foundation announced at the Bitcoin ESG conference held earlier this year that it is moving Dogecoin from Proof-of-Work to Proof-of-Stake.

What is Community Staking?

According to the Dogecoin Trailmap, community staking is a version of PoS that allows all community members, and not just whales, to earn rewards for their participation and contribution to the Dogecoin ecosystem. Additionally, users will be able to give back to the whole community through charitable causes.

The foundation is also working with other projects including Gigawallet, a PoS wallet project, and Libdogecoin, a javascript library for Dogecoin.

As per the recent update, the community staking is already in its testing phase with support from integrators who showed interest.

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“Over the next few months the Libdogecoin and GigaWallet projects will begin to take shape, and we have some early integrators who are interested in putting them to use in their projects. These early projects are about laying a solid foundation, while projects still to come will target improving transaction throughput and scale,” the foundation wrote.

Shifting from PoW to PoS

Dogecoin was originally built as a PoW cryptocurrency like Bitcoin. However, in recent times, there have been lots of energy efficiency arguments about PoW projects. Recall that even Elon Musk’s Tesla stopped accepting BTC payments for its products earlier this year, citing environmental concerns.

But Dogecoin is not the only project planning to move to PoS next year. Ethereum’s move to PoS has been in the pipeline for a long time now and it will play a major role in the Ethereum 2.0 upgrade in 2022.

In October, CryptoPotato reported that the first network upgrade on the Ethereum PoW dubbed Altair was implemented successfully.

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Crypto Staking Firm Figment Raises $110 Million in Funding Led by Thoma Bravo

Figment – a company that provides blockchain infrastructure and protocol staking – announced a $110 million Series C fundraise at a $1.4 billion post-money valuation. The investment was led by Thoma Bravo – an American private equity and growth capital firm.

Figment to Work on the Web3 Ecosystem

Apart from Thoma Bravo, the funding round was supported by many other giants in the financial field. These include Counterpoint Global (one of Morgan Stanley’s equity teams), Binance Labs, Avon Ventures, Mirae Asset, Bitstamp, CMS Holdings, B Capital Group, and more.

Figment aims to provide more accessible Internet by employing Proof of Stake (PoS) blockchain technology. The company is among the leaders in building the Web3 ecosystem and will use the $110 million to support the adoption, growth, and long-term success of the new iteration of the Internet that incorporates decentralization.

Lorien Gabel – Co-Founder and CEO of Figment – said his firm has had an “exceptional” year mainly because PoS has become mainstream and thus transformed the finance sector and added:

“The caliber of investors in our Series C round cements Figment’s position as one of the most trusted and well-established platforms in the Web3 ecosystem.”

Gabel claimed that “tons of experienced engineers” have recently jumped from traditional software into the crypto space. He revealed many of these people have joined Figment’s team and helped create an “amazing Web3 native organizational culture.”

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Tre Sayle – a Partner at Thoma Bravo – commented on the funding round, as well, saying, “We are thrilled to be partnering with the talented Figment team.” The exec described Figment as a company focused on building the next generation of blockchain technology, which has an entrepreneurial culture.

Other Investments Orientated Towards Web3

A few days ago, Seven Seven Six (a venture capital firm owned by Reddit’s Co-Founder Alexis Ohanian) partnered with Polygon to launch a $200 million fund to boost developments in the Web3 sector. The initiative will support protocols that explore “better ways for humans to connect online.”

Speaking on the investment, Ohanian said Web3 is still in its early stages, and the “most obvious opportunities right now are in gaming and social media.”

“The initiative will do just that, with a focus on gaming properties and social media platforms built on Polygon’s scalable infrastructure. We have already seen some of the best products founders in our portfolio start building on Polygon, and I’m excited for Seven Seven Six and Polygon to play a big role in shaping what the new Internet looks like.” – he added.

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Solana Takes the Helm as the Most Staked Crypto, Cardano Goes Second

The neck-to-neck battle among Solana (SOL), Cardano (ADA), Ethereum (ETH), and Polkadot (DOT) continues because they have gained the upper hand in different crypto areas like decentralized finance (DeFi), non-fungible tokens (NFTs), and staking.

Even if Ethereum takes the lion’s share in DeFi, Solana is the victor when it comes to staking with a value of $78.49 billion, according to crypto insight provider Staking Rewards.

Cardano comes second with $42.92 billion, representing 70.67% of the total value.  

Ethereum 2.0 and Polkadot wrap-up the top four staked cryptocurrencies with $33.9 billion and $23.68 billion, respectively.  

Staking entails locking up crypto assets for a certain period of time to assist a blockchain network in functions like the confirmation of transactions. In return, investors earn interest or rewards. 

This investment strategy is available in cryptocurrencies using the proof-of-stake (POS) consensus mechanism, deemed more cost-effective and energy-efficient. 

Ethereum 2.0 is a deposit contract that intends to transit the current proof-of-work (POW) framework to a POS model. 

Meanwhile, Solana has been experiencing overwhelming institutional interest, which played an instrumental role in its listing on Bloomberg’s crypto terminal, after Bitcoin and Ethereum. 

Solana is one of the sought-after networks in the Defi and NFT industries because of its relatively lower fees and high speeds because it merges the proof-of-history with the proof-of-Stake.

For instance, Solana can perform more than 1,000 transactions per second (TPS), which is about 60 times more than the current Ethereum network’s capability of about 15 TPS, according to data from Blockchair and Solana Beach.

As a result, its NFT secondary sales recently reached $500 million in just three months. Therefore, Solana continues to stamp its authority in the crypto space, given that it has surged by at least 15,000% on a year-to-date basis. 

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JPMorgan Analysts Bullish on Ethereum and Staking Economy

Going against the stance of the bank’s crypto disparaging CEO, Jamie Dimon, the analysts argued in a report this week that blockchains running more energy-efficient networks than Bitcoin will increase in popularity.

Staking currently generates an estimated $9 billion worth of revenue annually for the crypto industry, according to the report.

The researchers predict that Ethereum’s shift to proof-of-stake after the launch of ETH 2.0 next year will spur the adoption of the alternative consensus mechanism and staking. This could result in staking pay-outs surging to $20 billion following the launch of ETH 2.0 and $40 billion by 2025, reported Forbes.

Staking Beats Mining

Staking rewards the token holders rather than mining conglomerates which makes it more attractive to retail and institutional investors. The report noted:

“Not only does staking lower the opportunity cost of holding cryptocurrencies versus other asset classes, but in many cases cryptocurrencies pay a significant nominal and real yield,”

It continued to state that as the volatility of cryptocurrencies declines, the ability to earn a positive real return will be an important factor in helping the crypto market become more mainstream.

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The JPM research suggests that the staking economy will bring in millions in revenue for exchanges and companies offering staking services and taking a cut. It estimates that staking presents a $200 million revenue opportunity for Coinbase in 2022, up from $10.4 million in 2020.

It stated that staking and DeFi offer far better yields than the traditional banking system where interest rates are rock bottom or even negative in some instances.

“In fact, in the current zero rate environment, we see the yields as an incentive to invest.”

In April, CryptoPotato reported that JPMorgan had started hiring Ethereum developers.

Ethereum Staking to Surge

The authors predicted that the ability to use crypto assets to earn yield through staking will make digital assets a more attractive asset class and could help to grow mainstream adoption of cryptocurrencies.

Ethereum, which has seen a slump in hashrates, was mentioned several times with its transition to full proof-of-stake expected to occur sometime next year. At the time of writing the ETH 2.0 Beacon Chain had amassed a little under 6 million ETH. This works out at just over 5% of the entire supply worth around $12.3 billion at current prices.

It was yielding 6.4% per year which is way beyond anything in any high street bank. Additionally, EIP-1559 which will launch this month will burn network fees creating additional deflationary properties to the Ethereum network.

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Cardano (ADA) Staking Live on the US-Based Kraken Exchange

The veteran US exchange Kraken has added Cardano (ADA) staking as of May 4th. This comes amid the growing interest in the cryptocurrency, the price of which has been on a roll since the start of the year.

  • Staking in the cryptocurrency world requires the token holders to lock a certain amount of coins based on the proof of stake algorithm or any of its varieties. As such, they receive the right to vote and participate in the governance of the network and get rewards in new coins.
  • The trend has been gradually increasing in popularity among investors, and numerous crypto exchanges started offering such services.
  • The San Francisco-based veteran trading venue Kraken announced the addition of Cardano (ADA) on its staking platform yesterday. The firm said, “by staking ADA through Kraken’s market-leading staking service, you will take your place among the decentralized community of supporters helping to secure the Cardano network.”
  • As previously reported, Cardano reached full decentralization at the end of March when the entire community consisting of over 1,800 pools became responsible for 100% of the block production.
  • Kraken users would have to add the ADA tokens into the exchange’s staking wallet as the service went live at 21:00 UTC on May 4th. According to the statement, the rewards will be paid out on a regular schedule – weekly – with “no waiting or lockup period.”
  • The rewards will be between 4% and 6%, which Kraken described as “one of the highest returns in the industry.”
  • Users will also be able to “quickly” exit from the staking position by transferring tokens from the staking wallet back to the spot address.

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Bitcoin (BTC) $ 39,681.63 2.33%
Ethereum (ETH) $ 2,159.95 2.82%
Litecoin (LTC) $ 71.77 0.16%
Bitcoin Cash (BCH) $ 227.14 0.68%