Ethereum’s future looks bright as network will face yet unseen phenomenon
Ahead of the merge update, which will shut down the PoW consensus mechanism for good, Ethereum is facing a “once-in-a-lifetime” phenomenon that has been characterized as a “triple halving.” Blockchain Engineer Montana Wong telling What is it really.
Halvening itself is a concept applied to the Bitcoin mining algorithm that reduces the amount of coins awarded in each block by half every few years. The concept creates deflationary pressure on the price of the asset on the market, as miners provide less selling pressure because of the decreased supply in their hands.
Halving follows the simple economic law of supply and demand, which is why we are seeing the beginning of a bull cycle before the halving.
What about Ethereum?
Instead of the automatic reduction of miner rewards, Ethereum uses software updates that the community approves or disapproves of. With the help of manual updates and a couple of EIPs, block rewards for ETH miners dropped from 5 to 2 ETH.
Currently, Ethereum blockchain miners produce 6,500 new blocks every day, which gives us around 13,000 ETH issues. With the merge update, Ethereum’s issuance is about to become increasingly short, and it’s under the radar of most retail investors.
Annual issuance of ETH is going to drop from 4.3% to 0.4%, which is around a 10x reduction in selling pressure from miners. In addition to the absence of mining, the Ethereum supply is constantly reduced with the help of the burning mechanism and the supply reduction due to staked ETH being locked as there are no withdrawals implemented yet.
The three forces combined: issuance drop, burn and ETH lock create a “triple halvening” event that will have the greatest impact on the coin’s future.
