The Merge aims to switch the Ethereum (ETH) blockchain's proof-of-stake consensus method from the current proof-of-work (PoW) consensus mechanism (PoS). The renovation is currently anticipated to occur sometime between August and November after experiencing many delays. So, will ETH fees go down after the merge?
Layer 2 technology to reduce costs
To conduct a transaction on the Ethereum network, users have been forced to pay through the nose. On May 1, according to data from Bitinfocharts, a transaction on the Ethereum blockchain cost an average of $197 to perform.
Since then, the average ETH transaction fee has fallen by 99%, to $2.61 as of July 12. This might be because the decentralized finance (DeFi) industry has lost impetus after the Terra blockchain collapsed and the crypto markets fell. Since around July 2020, when it really started to take off, DeFi has been one of the largest contributors of Ethereum gas fees, along with non-fungible tokens (NFTs).
Every time a miner processes and confirms an ETH transaction, a fee is paid, and the miner keeps the fee as profit.
Raman: After the merger, Ethereum inflation will be 0.22%.
Vivek Raman also discussed Ethereum's inflation in his Twitter thread, claiming that it will decrease from 4.3% to 0.22% after the Merge. Because of a 95% decrease in supply, "95% less ETH may be sold everyday," this has happened.
He anticipates that Ethereum will enhance Bitcoin's use cases as "pristine collateral and a store of value" with the network update.
"It's excellent that Bitcoin has solidified its reputation as 'digital gold. ETH will serve as DeFi's primary collateral asset as well as a "digital bond" (staking yield = risk free rate), according to Raman.
