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Banking giant Citi highlights significance of Ethereum Merge upgrade

06-Aug-2022 By: Sudeep Saxena
Banking giant Citi h

The Ethereum (ETH) Merge upgrade, which is

 scheduled for late September, is one of the most anticipated cryptocurrency events, owing to factors such as the expected bullish influence on the asset's price. 

In this regard, Citigroup believes the upgrade may have various implications for blockchain.

According to the bank's report, once the update is implemented, it may result in decreased energy intensity, a change to a deflationary asset, and a possible path to a more scalable future via sharding.

According to Citi, the switch to Proof-of-Stake (PoS) might reduce Ethereum issuance by 4.2 percent each year. According to the report, once Ethereum becomes a deflationary asset, it will gain importance as a store of wealth.

Ethereum to become deflationary asset 

Citi also projects that as a deflationary asset, ETH is less likely to be the blockchain with the highest throughput. Based on the report, the Merge would reduce Ethereum's block time from 13 seconds to 12 seconds, resulting in lower fees and increased speed.

Interestingly, Citi stated that because Ethereum is a PoS network, it would draw cash flows, allowing the adoption of new valuation methodologies which are currently unavailable for the blockchain.

In general, Citi asserted that following the Merge, Ethereum would be an energy-efficient and environmentally friendly cryptocurrency due to a 99.95% reduction in energy consumption.

What does the Merge entail? 

On September 19, the blockchain will merge the current Ethereum Mainnet with the Beacon Chain PoS algorithm. In exchange, the Mainnet will continue to be protected by Proof-of-Work (PoW), while the Beacon Chain will use PoS.

Notably, since the announcement of the upgrade, the price of Ethereum has showed a positive trend, defying the market collapse to register minor gains.

As a result, the market anticipates several network developments, with a recent analysis claiming that the Merge will function as a catalyst to propel Ethereum towards becoming a 'global institutional-grade asset.'

Read also: Cryptocurrency price update: ETHEREUM PRICE PREDICTION: Ethereum is ready for a new surge as it holds key uptrend support.

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