According to Citi analysts, the total number of tokens supplied on the first day of the Merge dropped as the fees burnt were more than the rewards issued to validators.
Researchers from American multinational investment bank and financial services corporation, Citigroup Inc (NYSE: C) have shared some insights about Ethereum (ETH) following the merge that went live on the mainnet last week. According to the researchers, it is surprising that the price of Ethereum has remained relatively stable considering the significance of the Merge.
The Merge is one of the five upgrades that the Ethereum blockchain is bound to undergo in order to become a fully functional Proof-of-Stake (PoS) protocol. As it stands, the new Ethereum protocol is adjudged to be 99.95% more energy efficient than when it was still using Proof-of-Work (PoW) consensus models.
The transition to PoS changed a lot of things for the protocol including eliminating the rewards paid to miners. This PoW-induced issuance of Ethereum was pegged at 4.9 million Ethereum tokens annually, and in this PoS dispensation, this reward will be dropped by about 90% to just 600,000 Ether tokens per year.
According to Citi analysts, the total number of tokens supplied on the first day of the Merge dropped as the fees burnt were more than the rewards issued to validators.
Citi Researchers Has Positive Outlook for Ethereum as an Investment Asset
Citibank believes Ethereum has become a yield-bearing asset, considering the rewards to validators are now paid out at an annualized rate of 4.5%. This, the researchers say is more than some of the reward models on offer by traditional financial services providers.
This reward model accounts for why the United States Securities and Exchange Commission (SEC) has been showing signs it may initiate enforcement action on Ethereum as a security. As it concerns the price movement of the digital currency, the researchers observed that the rally in Ethereum’s price has been quite conservative over the past week.
While Ethereum is currently changing hands at $1,360.88, up 3.88% in the past 24 hours according to data from CoinMarketCap, it has recorded as low a price as $1,287.42 in the trailing 7-day period, having plummeted by as much as 25%. Other preceding upgrades have fueled more ambitious growth trends compared to the merge, a situation that implies investors are exercising caution in dealing with the crypto asset.
There is no doubt that the merge “sets the stage for large scalability improvements,” the note said, adding that the issue of the high gas fees is still largely subjected to high network activity.
As an investment asset, Ethereum now seems to make much sense due to its lower cost when compared to Bitcoin (BTC), and its higher energy efficiency. However, with so much uncertainty surrounding digital assets, investors’ enthusiasm may not be as kindled as anticipated.
The cryptocurrency is more functional in terms of scalability and is billed to remain more appealing to developers who prioritize efficient energy utilization. Before long, the impacts of the Merge will be felt, and early adopters may stand to benefit more in the end.
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
