In September, the Merge, a long-anticipated upgrade that will complete Ethereum’s shift from a proof-of-work (PoW) to a proof-of-stake system, is expected to occur. The Merge will also affect Ether’s money supply and make the network more ecologically sustainable.
Ethereum‘s switch to a proof-of-stake consensus mechanism will change the way it manages money, potentially making ETH rarer than Bitcoin. Vivek Raman, an Ethereum researcher, believes that Ethereum’s next transition to a proof-of-stake (PoS) system will make it the most prominent cryptocurrency in the market.
In an exclusive interview, Raman stated that Ethereum has the potential to surpass Bitcoin economically because of the supply shock.
In contrast, after the merger, Ethereum will have a lower inflation rate than Bitcoin. Especially with fee decreases, Ethereum will be deflationary, whereas Bitcoin will always be inflationary. The inflation rate does decrease with every halving, however.
Bitcoin’s function as digital gold is set to continue, but Ethereum will have a larger adoption rate due to its role as the base layer for the decentralized finance economy, according to Raman.
However, The Merge won’t do much to reduce Ethereum’s high transaction fees – which is still the main issue preventing it from scaling effectively.
It is important that users understand that all of their activities should take place on layer 2. Layer 2s will ultimately use Ethereum as a base layer 1 for settlement, security, and decentralization.