Pantera Capital CEO Dan Morehead highlights the benefits of transitioning Ethereum (ETH) to a Proof-of-Stake (PoS) consensus mechanism.
In the latest Blockchain Letter from Pantera, the top crypto-focused hedge fund executive Explain that one of the consequences of the upcoming network merger will be the elimination of miner rewards and therefore a reduction in the daily issuance of new ETH from 14,600 to 1,600 tokens.
According to Morehead, this would turn the leading smart contract platform into a deflationary asset.
“After “The Merge,” Ethereum’s issuance rate of 1,600 ETH/day in staking rewards minus fees burned the nets to zero. Subtracting the penalties incurred by validators (e.g. getting reduced for misconduct) and ETH that is lost over time, this would make Ethereum issuance net negative.
Against the backdrop of the current inflationary environment, Ethereum’s move into a potentially deflationary asset is an exciting prospect.
The newsletter goes on to explain how ditching proof-of-work (PoW) will make the project more environmentally friendly.
“The move to proof-of-stake will have a major impact on the sustainability of Ethereum with an estimated reduction in energy consumption of 99.95% – obviously a big improvement from an environmental, social and governance perspective. (ESG).
The 99.95% energy reduction will come from Ethereum’s transition away from proof-of-work – a process that uses electricity and hardware as primary costs to secure the network.
In a proof-of-stake system, the main cost to secure the network is capital in the form of staked tokens, and it does not require a lot of electricity at all.
Just this week, the Ethereum Foundation provided a detailed update on the merger timeline. The process will kick off in phases, starting with the Bellatrix upgrade on September 6, followed by the formal transition between September 10 and September 20.
The merger aims to address network scalability issues by setting the stage for future upgrades, including sharing.
Ethereum fed off a mild mid-week rally after dropping more than $1,850 over the weekend. ETH is up 8.3% in the past 48 hours and trading at $1,701.
Pantera Capital currently participate in 100 venture capital investments and has $4.7 billion in assets under management.
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