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Seeking Alpha 2022-09-14 22:57:18

Ethereum Post-Merge Economics

SummaryThe Merge will decrease Ether supply, with estimates suggesting a high likelihood of periods of negative net issuance rate.Deflationary periods are likely to put positive pressure on Ether price, which in turn will increase network security and blockspace value.The economic negative feedback loop will provide a sustainable economic model to incentivise all actors in periods of both economic expansion and contraction.IntroductionBy now, it shouldn't come as a surprise, as the highly anticipated Ethereum (ETH-USD) Merge is finally happening on September 15th. It is a historic event for the cryptocurrency industry, and it will change not only the economics of the Ethereum Network but the status quo of the industry as a whole.Quick Merge RecapEthereum's Proof-of-Stake (PoS) chain (i.e., the Beacon Chain) has been live since December 2020, running side-by-side with the Ethereum standard Proof-of-Work (PoW) chain (that everyone currently uses). The "Merge" will put an end to this double-chain period, and the event will mark the Ethereum transition to a fully PoS chain.Ethereum Merge (Ethereum.org)ETH Issuance RateAs of today (September 13th), the Ethereum PoW and PoS chain still operate in parallel. However, it is currently not possible to use the PoS chain, and if you were to send a transaction on Ethereum right now, it would still execute on the PoW chain. Nonetheless, validators on the PoS chain are already getting rewarde...

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