How does the Ethereum merger affect NFTs?

The merger is imminent, and it will be Ethereum’s biggest upgrade to date.

However, how will this major technological shift affect Ethereum’s NFT ecosystem?

It is difficult to draw conclusions yet, but there are some important points that need attention.

NFTs in the era of mergers

How does the Ethereum merger affect NFTs?

First, what exactly is a merger?

Until this year, Ethereum had relied on the Proof of Work (PoW) consensus mechanism, pioneered in Bitcoin by Satoshi Nakamoto in the context of blockchain.

PoW involves “mining,” a process in which miners use specialized hardware to competitively solve mathematical puzzles. The winner has the right to order the transactions into a block, during which the current state of the blockchain is maintained.

However, the PoW mechanism is energy-intensive and inefficient, so Ethereum core developers have been planning to migrate Ethereum to a proof-of-stake (PoS) consensus mechanism since 2016. PoS involves “staking,” which in the case of Ethereum means that users need to stake ETH to participate in and profit from the creation of blocks.

How does the Ethereum merger affect NFTs?

Ethereum took a big step towards this migration in December 2020 when the PoS “beacon chain” was launched. Since then, the beacon chain’s deposit contract (etherscan.io/address/0x00000000219ab540356cbb839cbe05303d7705fa) has accumulated nearly 13 million ETH and paved the way for the merger. Later this year we will see the current PoW execution layer of Ethereum merged into the consensus layer of the PoS beacon chain.

How does the Ethereum merger affect NFTs?

Moving to PoS will make Ethereum more energy efficient, decentralized, and cryptoeconomically more secure. On June 8, 2022, when Ethereum’s Ropsten testnet underwent an experimental merger event, we got a glimpse of what such a merger might look like. As a result, the Ethereum mainnet will officially merge later this summer or early fall, as scheduled.

How does the Ethereum merger affect NFTs?

green effect

ASIC and GPU devices are used for PoW mining operations, many of which are very large and consume a lot of energy. Therefore, the transition to PoS will reduce Ethereum’s energy consumption by over 99% by largely “dephysicalizing” the consensus process. PoS is a virtual mechanism based on pledged deposits in the Ethereum Virtual Machine (EVM), instead of relying on large ASIC and GPU mining farms that consume a lot of energy.

Going forward, this greening of Ethereum will have a very good impact on public perception. Ethereum has so far dominated the NFT ecosystem, but environmental concerns over the past two years have contributed to Ethereum’s shrinking market share, such as the proliferation of NFTs on the Polygon and Tezos chains. Migrating to PoS will solve this problem once and for all, and Ethereum and its Layer 2 network will be able to better facilitate the mainstream acceptance of NFTs, which will also generate more NFT activity.

From one era to another

The merging process should be imperceptible to Ethereum end users like NFT traders. In other words, dapps (decentralized applications) will still function normally and no chain disruption is expected.

So what makes the difference? A new historical separation will be born, NFT will be divided into PoW era and PoS era, and merger is the event that separates these two eras.

How does the Ethereum merger affect NFTs?

Of course, it is too early to say how to evaluate this historic event. In the survey initiated by 4156, the co-founder of Nouns DAO in the above picture, we can see that 60% of the participants do not think that the last Nouns in the PoW era or the first Nouns in the PoS era will be obtained in the auction Premium. So this distinction may not be so important, or future archaeologists will prove that this is actually a milestone event, only time will tell.

Deflationary Weberon Money Commodities?

How does the Ethereum merger affect NFTs?

Notably, the merger is expected to drop Ethereum’s ETH issuance rate by around 90%. If you factor in ETH’s transaction fee burn, the merger would defuse the selling pressure in ETH worth millions of dollars and replace it with buying in ETH worth millions of dollars per day.

How does the Ethereum merger affect NFTs?

So, assuming that such a major shift in demand can indeed cause an increase in the price of ETH, what would happen then? We will wait and see, but what is certain is that as far as NFTs are concerned, the rise in the price of ETH can catalyze a new wave for the ecology.

For example, Vance Spencer of Framework Ventures made a very interesting comment this week calling ETH a “Weberon currency commodity” as he observed that people tend to spend more ETH when prices are rising.

How does the Ethereum merger affect NFTs?

So you should see what I’m trying to say… The rise of ETH after the merger will trigger a big rebound in the NFT ecosystem. Whether this will happen cleanly remains to be seen, but the possibility is already on the horizon.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-does-the-ethereum-merger-affect-nfts/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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