How Ethereum's outlook has changed since the move to PoS

How Ethereum's outlook has changed since the move to PoS

The Merge update took place on September 15 on the Ethereum network, which completed the altcoin's transition from Proof-of-Work to Proof-of-Stake (PoS) protocol. The main purpose of the update was to solve the problems associated with the growing number of blockchain users.

Now the security of the blockchain is not ensured by miners, but by validators (stacking). Before the event, the cryptocurrency rate was actively growing, but immediately afterwards it began to decline. In mid-September, on the day of the update, the altcoin price exceeded $1.6 thousand. Since then, it has fallen in price by 19% and as of October 24 it is trading at $1.3 thousand.

Ethereum's price and capitalization have declined since the transition, but there has been no collapse, indicating investor confidence in the protocol going forward, according to lead analyst 8848 Invest. Also among other consequences of the altcoin's transition to PoS, the expert singled out:

The issuance has significantly decreased in the network (by 90%), but remains inflationary for the time being. In the future, against the background of increased activity of the network, deflation is likely to be achieved;
power consumption, necessary for Ethereum network operation, considerably decreased (from 80 TWh to 0.01 TWh per year);
commissions on the network continue to be low after the move to PoS ($1 to $6 per transaction on average), but overall this is also affected by the decline in overall activity from developers and users of dApps;
increased centralization and censorship on the network due to a certain number of large validators, including those subject to OFAC requirements;
TVL's share of the Ethereum network has grown slightly (by 3.8%), and continues to be steady.
"Given these factors, we can conclude that significant changes to the protocol and token are out of the question, which fits with the concept of the transition to PoS: major upgrades that will increase network capacity and reduce costs were planned by developers in the future, in 2023-2025," the expert explained.

He reminded that ETH is currently not ahead of other assets, including BTC, in terms of exchange activity because volatility and volumes have fallen across the entire crypto market.

The expert believes that it will only be possible to talk about the future prospects of ETH as the largest altcoin after time, when the market returns to growth. In terms of technological development, Ethereum has competitors, such as Solana, Polkadot, Avalanche, but in terms of the current demand for the platform from developers, altcoin continues to be the industry leader, even despite the flaws and technological imperfections, the expert believes.

"In any case, the next bull cycle will bring the price of ETH to historic highs, but whether the project, according to its design, will go beyond the blockchain industry, it is still difficult to say," predicted the specialist.

There is no reason for Ethereum to give up its leadership position to other altcoins, the senior Bestchange analyst agreed. According to him, the cryptoproject community remains one of the most powerful, the ecosystem continues to be the most popular medium in the DeFi segment, and onchain parameters have not deteriorated after the transition to PoS. Among the pluses, he also noted the exploitation of the trend in society toward green business, which also increases interest among new potential investors, as does the possibility of passive income just from owning tokens.

"Potential long-term risks exist mainly from the possible equation of PoS tokens with securities in many jurisdictions with developed economies. This factor could affect the entire ecosystem of decentralized finance and could have a negative impact on capital inflows in the future," the analyst warned.

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